A lesson learnt in outsourcing charity financial services

February 8, 2012: Recently Charity Business announced the closing down of its operations, which focused on accounting outsourcing. The firm offered services such as payroll, bookkeeping and accounting and they provided services to more than 150 charities.  These charities are now faced with the problem of recovering all their data and managing these services by their own.

Charity Business based its operations in Swindon from where it remotely handled the operations of the clients who are located in London and other distant places. This might have been a cost effective proportion, but there was little or hardly any contact with the ground realities, more importantly in the field of outsourced finance business. It is one area which requires close level contacts with project staff. In real business, project and finance staff finds it difficult to communicate and this gap will make things worse.

However, the increasing requirement for a good understanding of each project’s finances, and the resulting impact on the charity’s balance sheet and viability, turns the concept of a “quasi-finance director” very attractive. Most of the service providers are providing such services and in some of the cases they do it more effectively and economically than others.

The service providers should provide the top level management of the charities with timely and accurate information for them the properly manage risk and opportunities.

At a time when pressure is mounting on the charities to enhance charity accounting standards, both in terms of costs and fundraising and performance, outsourcing was considered as an option with less risk. The smart marketing and a good looking client base could create a false sense of security.  Once agreement is reached, it is difficult to pull out.

This is what happened in the case of Charity Business too. They had better client base, but time has proved that it was not the reality. For a company like Charity Business to close down in such an unorganized manner, shows us that there are many other aspects to be taken into account.

The first and foremost lesson to be learned from the closure of Charity Business is that the charities should be careful in selecting the outsourcing service provider and that the complete ownership of financial information is important- both in the case of in-house operation or outsourcing. May be this is a lesson for all.

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