A quarter of charities do not measure their impact, and just over half measure the impact of all their activities, according to a report by New Philanthropy Capital.
Almost two in five charities say they are under too much pressure to measure impact, and one in four say they could spend money better on something else.
Making An Impact, published today, says that impact measurement is least common among small charities: only 47 per cent of charities with incomes under £100,000 measure impact at all. But even among charities with incomes over £10m, 14 per cent do nothing to measure their effectiveness.
The report, which is based on phone interviews with 1,000 charities in the UK, says that 74 per cent of charities have increased the amount they spend on impact measurement compared with five years ago. Of all charities surveyed, 52 per cent say they have increased impact measurement because of the requirements of a funder, and 22 per cent have done so because their board or senior management feel it is important.
But the report says that the main benefit of measuring impact appears to be better service provision rather than improved ability to attract funding.
"Funders’ requirements have been instrumental in increasing measurement efforts over the past five years," it says. "But the main benefits cited by charities are about improving services, not about funders at all."
The report says that charities, funders and government all need to do more to make impact measurement commonplace.
"Although great strides have been made by the charity sector on impact measurement over the last five years, many barriers remain," the report says. "Most charities believe the main barrier is a lack of funding to measure results, though a lack of staff skills and knowledge of how and what to measure feature prominently."
About 89 per cent of charities say a lack of funding and resources is a barrier to developing impact measurement. Forty-one per cent say a lack of staff support is a barrier, and 36 per cent say lack of trustee support is a barrier.
Fifty-three per cent of charities say that knowing what to measure is a problem, and more than 40 per cent say they would like more training and guidance on developing measurement tools.
The report shows that charities are split over the effectiveness of impact measurement. Of those who measure impact, 25 per cent say it has improved services. But 30 per cent say that impact measurement is not necessary to know that services are working.