Finance teams crucial for not-for-profit success, data reveals
Having an efficient, productive and strong finance team is critical for the effective operation of a not-for-profit organisation, according to an HLB Mann Judd report.
The HLB Mann Judd’s Not for Profit Leaders Report revealed a not-for-profit organisation must have an efficient and well-organised finance team and management system to maximise impact, sustainability and maintain public trust.
The report is derived from a survey of more than 80 not-for-profit leaders between July and August 2024.
The results highlighted 68 per cent of respondents said their financial performance has been negatively impacted by macroeconomic factors such as cost of living.
It was also found that nearly 60 per cent of respondents experienced turnover within their finance team in the past 12 months, and 43 per cent of leaders were looking to outsource some of their finance processes such as payroll.
According to the report, a strong finance team is essential for the success of a not-for-profit organisation.
“They play a crucial role in ensuring financial stability, managing resources effectively, and providing accurate financial information to support decision-making,” the report said.
A strong finance team has also demonstrated to provide valuable insights into fundraising opportunities and cost-saving measures.
The respondents were asked about how many people made up their finance teams, with 52 per cent stating they had two to five people and 73 per cent of these teams being in-house.
The report noted having an in-house finance team can be costly and resource-intensive, despite it being able to provide deep organisational knowledge and control over financial processes.
Outsourcing finance functions was suggested as it offers flexibility and cost benefits, however it could add potential risks to data security and control.
The results also highlighted 69 per cent of not-for-profits would not be looking to grow their finance team.
Though finance teams are crucial for the operation of the business, most respondents have experienced significant staff overturn with 59 per cent seeing a change in their finance team over the last 12 months.
The report stated this high turnover can have several negative consequences, such as loss of expertise and experience, increased costs, decreased productivity, disruption of tasks, and a demoralising work environment.
“A 59 per cent turnover rate in a finance team indicates a significant level of instability and disruption within the department,” the report said.
To ensure the continued health and stability of a business, not-for-profits need to address the root causes of high turnover.
The results showed that annual reviews of finance processes are crucial for maintaining efficiency and accuracy.
“By regularly examining their operations, finance teams can adapt to changing regulations, business growth and technological advancements,” according to the report.
“Identifying and eliminating efficiencies, reducing errors and mitigating risks are key benefits.”
By annually reviewing the finance teams, team morale, productivity and overall financial health can be enhanced and streamlined.
Respondents of the survey were also asked if they’re looking to outsource any part of the finance function, to which 43 per cent said yes.
The results demonstrated payroll is the number one thing that respondents are looking to outsource as Australia’s payroll and award system is considered to be one of the most complex on a global scale.
Most not-for-profits are looking to outsource their payroll due to an increase in wages, with 90 per cent of respondents confirming wages had increased in the last 12 months.
By outsourcing organisations’ payroll systems, it can be ensured they provide reliable and equitable compensation to employees, which allows them to cultivate a motivated and dedicated team.
This links back to having an efficient and strong finance team and management system as it allows organisations to forecast and budget for payroll expenses, reducing the risk of underpayment.
“This approach helps avoid unforeseen costs related to wage repayments, thereby protecting financial health and reputation and freeing up additional resources to focus on core mission and objectives.”
