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Going Digital: Why NGOs Need to Overhaul their Approach to Money Management

NGOs must closely monitor their cash flow and future projections in order to maintain their operation.

NGOs spend almost 80% more than for-profit companies of the same size and employ about twice as many staff members in financial departments.
NGOs spend almost 80% more than for-profit companies of the same size and employ about twice as many staff members in financial departments.

Financial planning in NGOs is usually centred around issues of fundraising. After all, most organizations are largely reliant on individual contributions for their operational expenses. Today’s charitable leaders must have a deep knowledge of their sector, political issues and social media – among a wide variety of other topics. It can be an enormous challenge to stay up-to-date on all the issues with potential affect on a cause. Additionally, NGOs must closely monitor their cash flow and future projections in order to maintain their operation. For today’s groups, this means more than simply budgeting, billing and allocating cash.

Yet some not-for-profits still fail to prioritize financial strategies or invest in accounting tools. This is one of the reasons that these groups wind up spending almost 80% more than for-profit companies of the same size and employ about twice as many staff members in financial departments.

These are worrying stats for any NGO. Not only does this spending take away funds that directly contribute to their cause, but it also raises their administration budget. These fees are increasingly important as the public has become skeptical of a not-for-profit that allocates too much towards these types of expenses. In fact, some U.S. government guides advise donors to review an organization’s admin costs prior to making a contribution.

Here are three major reasons why NGOs need to change the way they approach billing today.

1. Reconciliation

For any business with an international money transfer component, reconciling invoices can take up a huge amount of time. This is particularly challenging for NGOs who can operate a world away from where their funds are heading and have a limited administrative staff. Foreign bills can be subject to both exchange fees and unpredictable rates. Additionally, invoices can go missing, payment might be late, or processing time may be lengthy. NGOs might also have a bank for day-to-day expenses and use another method for foreign exchange or keep overseas accounts. All of these factors make balancing a budget a difficult task. Organizations should consider sending and receiving invoices through a digital platform. Not only will this automate many time-consuming tasks but it will also make locating particular costs and vendors quick and simple.

2. Centralization

As mentioned, a typical NGO can have multiple financial accounts and systems. For example, an employee may search through multiple suppliers to find the optimal exchange rate for a particular exotic currency. They might follow this same strategy for all their international payment needs. Though this may initially seem smart, the time and effort involved in finding and maintaining numerous contacts and relationships can quickly become cumbersome. Each financial institution or service provider will also have their own set of fees. This is particularly important for non-profits who must stretch every dollar in order to benefit their cause. Consolidating into a single source can reduce these extra costs. This change will also make reporting significantly less complicated and time-consuming.

3. Client Relationship Management

Unlike corporate accounting departments, NGOs may not believe they need one-on-one assistance for a financial partner. Yet because each organization has distinct and important goals, such services can be a huge benefit. Charities are unique as they often require money transfers to isolated regions without traditional banking infrastructure, areas with sanctions and places where fraud is a risk. A financial professional can guide the NGO through the best and most-efficient method for payments in these situations. Such advice can help avoid compliance errors and reduce fees.

Invoice management and cash flow are central to any organization but in particular NGOs, whose purpose is to maximize funds for their cause and reduce administrative expenses. Yet these groups often spend more than their corporate counterpart on accounting functions. In order to optimize this necessary task, today’s non-profits should look to revamp their current system if they are plagued by delays, paperwork and excess fees. Hundreds of NGOs choose to partner with Western Union Business Solutions to manage their payments in a single platform. We offer mobile payments to 10+ countries, wire payments in over 130 currencies and an easy-to-use, no software system.

Contact one of our NGO Specialists for more information.