Finance: Outlook - It's good to source out your finances

Stephen Brooker, a consultant specialising in governance and financial strategy

Shared services can only boost the resources of charitable bodies.

The business trend of the decades either side of the turn of the century has been, and remains, the move into outsourcing. Some say it has gone too far when companies outsource their administration to the customer via those pesky enquiry lines, where your 'important call' is held interminably in a queue even after you have navigated the complexities of the automated call-handling software. However, there is no doubt that outsourcing the basic book- and record-keeping functions of a finance department realises significant savings for medium to large operations.

At the NHS Trust where I am a non-executive director, we realised a 15 per cent saving by doing this, and we expect that to climb to 20 per cent when e-procurement is added to the purchasing and accounts payable module.

In this case, the organisation that does the processing is a shared service, rather than a commercial organisation. Shared services are simply a collaboration between two or more bodies to reduce costs by realising economies of scale.

At its simplest, one organisation processes the other's data in a separate ledger, but it can also mean setting up a joint venture that does the processing on a fully dedicated basis.

It has always struck me as odd that more charities do not set up shared-service organisations for finance, human resources and other administrative functions.

Charities co-operate in so many ways, formally and informally, but it seems that chief executives and other senior management are reluctant to try anything too radical in this area. The Charity Finance Directors' Group has taken some steps, but they usually result only in single initiatives on a one-off basis. Its recent move to Mezzanine 2 - run by Community Action Network - with 43 other charities is, however, a welcome demonstration of what can be done to share services such as reception and reproduction facilities.

Why should every charity have to staff (or take the risk of not staffing) an omni-competent HR department when the needs are all pretty much the same? Each has to comply with the same employment legislation - only the terms and conditions of employment vary. Within the finance function, the needs and challenges of the fundraising charities are all very similar on the income side, even though the money will be spent in different ways, resulting in differing control requirements. Specialised back-office functions such as legacy administration could also realise the economies of scale associated with outsourcing. The nature of that task points clearly towards the shared-service model - particularly when so many charities become common beneficiaries of an estate.

KEY POINTS

- Outsourcing basic book-keeping functions can realise significant savings

- One NHS Trust has realised a 15 per cent saving by doing so

- Shared services, where two or more bodies collaborate with the aim of reducing total costs, can also bring savings.

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