We’re all aware that in the current funding environment there are enormous challenges for charities when it comes to working out how to maintain their services and how to make their work sustainable. This often leads to fundamental questions about what the charity is for, what it should focus on in terms of the impact it can achieve, and how it is funded.
During my time working in charity finance, I've often heard about the need for charity finance professionals to break away from their bean-counter image and step up to more strategic roles. This feels more important than ever, and I’m pleased that Cass Business School’s Centre for Charity Effectiveness is now looking to catalyse a new conversation about charity finance.
Part of this conversation will focus on the role of social investment in facilitating both sustainability and impact, and it’s critical that finance directors are part of this discussion – both within their own organisations and in feeding back on the funding models that are emerging.
Finance directors should be involved at the outset if your charity is exploring the use of social investment – their skills and outlook will be invaluable in their charities’ decision-making. But the FD also needs to be open to the potential opportunity and wider benefits that investment could bring to their organisation. It can be easier to adopt the go-to FD Eeyore-like stance that something new (especially if it involves borrowing) will be too risky – an instinct that I had to overcome in my FD role at Scope.
So what is the finance director’s role within their organisation in respect of social investment?
Opening up new strategic options
Understanding the social investment tools that are available could allow you to open up different strategic options for your charity – for example, a charity that supports homeless people and would like to provide housing directly might be able to achieve this only by using investment to access property.
Strategic financial management
The decision to borrow should be aligned with the organisation’s reserves and investment policies, and its longer-term financial plans – all of which are the FD’s domain. How is any future growth or new activity going to be funded and how could investment support or accelerate that growth?
Being an enabler
The finance director might not initiate the decision to use investment, but should be key in the process. You or your team are likely to support your chief executive and business development colleagues in evaluating options and modelling the financial implications and impact that could be delivered through investment, and in providing an impartial view on the investment options available and the risks involved.
Giving confidence to investors and your board
The chief executive and the FD are likely to work more closely on any significant investment project. The chief executive will take the lead in pitching the organisation’s work to investors, but the investors will often look to the FD to gain confidence that the finances are well run and "what-if" scenarios have been considered.
Most finance directors didn’t come to work in the sector for the love of budget spreadsheets and the charity Sorp – we’re driven by the impact our organisations have and seeing how the resources available can make that happen. Social investment brings a different dimension to our funding discussions, and perhaps the charity finance leader that is well embedded in the strategy conversations within their organisation is best placed to make sense of the challenges and opportunities it offers.
Geetha Rabindrakumar is head of social sector engagement, Big Society Capital