Back to basics: Outsourcing finance

Tips from John O'Brien, chair of the Community Accounting Network

There is much talk about whether charities can outsource more back-office functions. Many organisations see it as a good way of cutting costs and increasing efficiency, but I'm not so sure it is, especially for small organisations and for the finance function.

Outsourcing makes sense in certain areas, such as IT, but finance is a bit different. The accounting function comes in two parts - administration and financial management - and with both, outsourcing raises problems.

The administration part of the job involves processing transactions, record-keeping and reconciling to the bank. Meanwhile, management involves making sure things are entered correctly, interpreting the figures and reporting to the board and your funders.

In small organisations, the financial administration usually forms a small part of someone's job. If you pay another agency to do it, will the person who did the job really use the few hours a week to deliver front-line services, or will they spend all that time on the phone to the agency? You should always have your financial information at your fingertips.

As for the financial management, my advice is that you should not outsource it. An organisation needs to manage itself, and there is a real risk that if you outsource this task you will actually end up with no one taking it on and no one keeping a close eye on the money. It's like paying someone else to do your breathing.

- John O'Brien is chair of the Community Accounting Network and chief executive of CA Plus

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