5 must-have financial skills for NFPs

What does your finance team look like? Some of you might be asking ‘what team?’ As a core cost that is rarely funded under grant programs, financial management is often an ‘add-on’ to another admin role within small organisations, whilst larger, complex not for profits often have a full team with a range of skills to manage day-to-day financial transactions as well as planning for the longer term.

So, what your team looks like will depend very much on the size, nature and financial structure of your organisation. But no matter the size of your team, there are some financial skills that all not for profits should have access to – whether that be in-house or outsourced. Below we’ve put together our top five.

1. Day-to-day financial administration

Such as data entry and bookkeeping, processing purchase orders, invoicing, bank reconciliations, etc are the bread and butter of finance work and you should expect these from your team.

2. Financial planning and management

You need to be budgeting your income and expenditure and reporting actuals against your budget on a monthly basis. We sometimes find that smaller teams that are resourced for financial administration (rather than management) may be skilled to deliver the budgets and reports, based on reworking previous versions, but lack the strategic understanding to provide the analysis that is really needed for planning and decision making. This is an area where bringing in external expertise can really help the senior staff and board.

For larger organisations with resources, you’ll also need the skills to manage your investments – maximising the returns against your planned objectives. Again, there are opportunities for outsourcing here, but your business needs to set the policy regarding capital retention, income requirements and risk.

3. Understanding the NFP sector

There are some peculiarities to practice and regulation in the not for profit sector and it’s important that your finance team understand them. The ACNC is hitting its stride and using its regulatory powers to take action against organisations that don’t comply with reporting requirements, so it’s critical that your finance team understand what is expected of your organisation in relation to ACNC reporting.

Another area where we sometimes see organisations struggling is in relation to acquittals to funders. This can get complicated for organisations with multiple institutional funders, as resources may be funded from a variety of sources, all wanting slightly different reporting information.

However, failure to submit accurate and timely acquittals is likely to result in delays to future payments, or withdrawal of funding altogether, so your finance team need to get them right, and get them in on time. But this isn’t a responsibility that you should dump entirely on your finance team – reporting requirements usually include a narrative as well as the numbers, and your program staff also need to appreciate the importance of providing accurate and timely information.

4. Understanding industrial relations requirements and your employment policies

Even if you outsource payroll, your finance team may be the people giving the instructions on who should be paid what. So they need to understand the interplay between IR legislation, industry awards, your EBA and any internal policies and how these impact on both payments to individual staff and to the organisation’s overall financial picture, for example in terms of liability for annual leave and long service leave. This can be further complicated in our sector, where employees are often working irregular hours and practices around things like time off in lieu and access to salary packaging options are the subject of an organisation’s internal policy.

5. Segregation of duties

This can be a particular challenge for smaller organisations, where there is very limited resourcing for the finance function. NFPs are unlikely to get all the skills they need in one person, and it’s both a fraud and a business continuity risk if all financial processing is done by one individual. It’s bad for the business, and it’s not fair for the sole person in a finance role to carry that responsibility – and all the scrutiny that comes with it – alone.

Organisations that are sufficiently resourced to spread activities across a number of staff are more easily able to mitigate this risk. If you’re more restricted in your resourcing, as a bare minimum, you should be ensuring that no single person can process a transaction end to end through the business. Separate financial administration activities from sign-off authorities, using your senior staff as a checkpoint to reduce the risk of fraudulent payments and transfers of funds from your charity.

So what are your options?

If you haven’t quite covered off the top five skills we’ve outlined above, one option is to look at opportunities to outsource aspects of your work. In doing so you need to be conscious of cost (obviously) and the fact that it may be less cost-effective and efficient to outsource some of the lower level work than to have part-time admin staff in house.

Also remember that you are outsourcing activities and accessing expertise – you are not outsourcing your board’s responsibilities. So be conscious of delegation and authority issues and how you can best use outsourced services to complement the skill set of your internal resource.

For more information on CBB’s consulting services, please contact us via email consulting@cbb.com.au or phone 1300 284 364.

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