3rd Sector
The Rise of FP&A within Not for Profits

The Scope

It’s no secret that charities are going through a lot of change at the moment.  In a tough fundraising climate, organisations have had to review traditional income streams and look to diversify where possible.  Clearly, this is much easier to do with good reserves in place and flexibility to invest, however, as we know, ‘spare’ cash is a luxury the vast portion of the sector doesn’t have.

Even when in a strong financial position, knowing where to invest for the coming years can be a difficult guessing game.  As such, it’s imperative that Fundraising Directors are integrating with finance, to ensure that full investment appraisal is carried out for new income streams.  This can still be alien for some fundraising teams, who have traditionally often relied on finance to simply maintain budgets and monitor performance against these, although differences around when money is accounted for between finance and fundraisers can also bring through divisions.

True financial analysis within the sector is somewhat of a developing skillset.  The sector is responding to the needs of the organisation and FP&A is frequently coming to the forefront.

The Challenge

Charity finance teams have worked hard over the years to develop true business partnering within the organisation, not just with fundraising teams, but across all operational areas of the business.  This has been with great success in many organisations and finance is more frequently being viewed as more than just a back office function.

However, financial analysis within charities can sometimes be seen as the cherry on the cake, rather than the cake itself, and investment from Boards can be a tough sell.  Understandably, financial governance takes the limelight within charity finance teams, emphasised by events in 2016.  When looking at trustees, finance professionals can often tend to come from a more traditional accounting background and will inevitably place more emphasis on ensuring FRS102 is implemented, over KPI’s.

Equally, whilst we have seen a shift for Fundraising Directors to have a desire to engage finance as part of all commercial decision making, it can be difficult for Boards to justify investing in new finance systems when there is a general tightening on the purse strings at all levels.  FP&A is ineffective without the right systems in place and Finance Directors have to work hard to influence key decision makers within the business and sell the long-term benefits of having the right tools in place.

Finance Directors have to also look within their own teams and assess whether or not they have the skills in place to deliver an effective FP&A function.  More often than not, new skills will need to be brought into the team and this can present its own challenges.  Finance Analysts in the private sector often demand high salaries and attracting them to the sector can be a challenge in itself.  Proper benchmarking exercises need to take place to negotiate with HR around salaries, to ensure charities are attracting the right talent at a reasonable cost.

The Way Forward

In order to respond to a more commercial way of working, I believe it needs to start from the top.  When recruiting finance professionals at Trustee level, emphasis needs to also be placed on attracting individuals with a strong track record in commercial finance roles, not just in governance and controls.  Charities have a history of attracting some amazing finance skills onto Boards and this is something that the sector can be very proud of.  However, recognising the future demands of the sector will enable organisations to ensure they are continually attracting the skills that are most relevant for the organisation at that time.

From an internal staffing point of view, recognising that certain skillsets can demand higher salaries will support benchmarking.  We’ve become very good at recruiting ACA’s into the sector over the years, however it can be sometimes harder to attract CIMAs from private sector industries with a good background in commercial analysis.  Understanding that good Finance Analysts will demand higher salaries than a more traditional Management Accountant in the private sector will support benchmarking.  Within charities, recently-qualified Finance Analysts will often look for circa £45,000pa, with private sector equivalents of £50,000-£55,000pa, if not more.

When done right, financial analysis should pay for itself and embedding the culture of FP&A within a charity, along with having the right skills and systems, the sector will be in a strong position to tackle an uncertain climate and adapt funding models accordingly.  At Badenoch & Clark, we are already engaged with a number of charities to appoint Board-level FP&A roles, with the trend set to continue throughout 2017.

I would welcome your thoughts and feedback on how you have approached this within your organisation.  If you would like to discuss more about our work in this area, please do feel free to get in contact with me.

Mark is an Executive Consultant, leading Badenoch & Clark's 3rd Sector team, with six years' experience recruiting at a mid-senior level within the sector.

 

If you would like to contact him for more information or advice, please call 020 7634 0389 or email mark.crowley@badenochandclark.com.

Category

Recruitment
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