Common pitfalls charity/third sector entities need to avoid for a healthier financial position
According to researchers for Sagacity’s Missing Billions: Charity Edition, UK charities are losing out on 6.84% of potential income each year, equating to £5.97bn annually.
Two of the main causes of lost revenue are a lack of oversight and poor processes. Our Founding Director Andy Nash has reviewed the report and its common pitfalls that charities and third sector not-for-profit entities can fall into, which can hurt your impact and ultimately the amount you can support your beneficiaries’
In summary:
- It estimates that £597m is lost to billing issues caused by inaccurate or incomplete data and £139m of unclaimed gift aid.
- The report says mistakes caused by third-party fundraising partners including missing data for new donors lead to lost revenue.
- It also says money can be wasted targeting one-off donors rather than long-term givers.
- One in five respondents could not accurately state how and where individual donations were spent, with around half worried this could put people off donating.
- Three in five respondents said they could double donations if they could better prove where money is spent.
The value of lost income annually is staggering, and the fact oversight and poor processes are the key reasons for this is eye-watering.
Fail to prepare, prepare to fail
You take your car to a mechanic when it has a problem, and you have an eye test at an optician when eyesight is in question, so the same should be for your charity/third sector’s financials. Does your charity/third sector company use an outsourced financial company with the right skills and expertise to navigate you successfully? If your accountancy firm offers generic financial support, could they be missing out on some of the really specific knowledge the research above has highlighted that you desperately need to keep every penny that you have worked so hard to raise?
Scott Logie, chief commercial officer at Sagacity said of this report: “The amount of money being left on the table by charities is alarming – especially regarding gift aid. HMRC paid charities £1.6bn last tax year, but our research indicates charities could have collected at least £139m more if they could more effectively match donors to donations.
He said almost half of charity revenue leakage can be traced back to problems with data – presenting an opportunity for charities to close the gaps.
“Look across the organisation at all levels to understand where issues might be occurring and how to fix them. From onboarding donors to working with partners. Long term, fixing leakage isn’t all about money either. It will also enable more accurate targeting, financial reporting and governance, improve the donor experience, and even attract more donors as they see where their valuable donations are spent.”
Take financial control today
Our team here at Enaid work with clients across England, Scotland and Wales, ensuring they’re in the best financial positions possible, and we strive to mitigate any of the risks mentioned in the above report. As proud members of ICAEW, our processes and procedures are therefore subject to monitoring visits, as well as us being a registered training firm with the ICAEW and authorised to train ACA students. We know financials, and we know the charity/third sector; it’s our DNA.
If you’d like to explore a better financial future for your not-for-profit, contact us today.
*Read more about the report at: https://www.civilsociety.co.uk/news/uk-charities-leak-almost-6bn-revenue-annually-report-estimates.html#sthash.x8tqVBPD.dpuf
