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Should your charity outsource?

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Charities have been outsourcing a wide range of functions for many years now and this has created a large industry providing front line and back office functions. In fact many charities have become outsourcers themselves, providing valuable services to many government departments. It is clear therefore that outsourcing is here to stay with the challenge being deciding what, if any, outsourcing should be investigated and implemented for your charity.

The starting point is usually a drive to save costs and in these financially challenging times that is certainly something worth considering. However, it is not the only factor to think about, here are some others to note:

  • It can save time and release resource to focus more directly on your charitable objects.
  • It will provide skills that you cannot source internally or cannot justify recruiting full time staff for.
  • It can provide resource to manage rapid growth, perhaps after winning a new contract to deliver services.
  • It will spread the risk of delivering your services.
  • It can reduce the exposure to high capital costs of keeping equipment and software up to date.

Once you have decided to explore the outsourcing route, there are further considerations that need to be made:

  • The impact on your current team, should it require redundancies or transfers to a new organisation.
  • The impact of VAT on costs charged by a service provider as often these cannot be recovered and may significantly affect any potential cost saving. You should seek professional advice in this area.
  • Management of the contract to ensure consistent high quality service delivery with an agreed performance criteria in writing.
  • Could the contract be priced based on actual savings delivered or in the case of fundraising, the additional donations received?
  • Reputation management, especially in the case of fundraising.
    Data protection.
  • Performing due diligence on suppliers and obtaining multiple references to verify ongoing service delivery.

Giving due consideration to all of the factors affecting outsourcing can be complex and daunting, often stopping charities from exploring their options fully. However, with the support of professional advisers and the skills which exist within the charity, planning and implementing change as well as potential associated risks can be managed effectively. With many charities facing a decline in their income and increasing pressure on costs,outsourcing options are well-worth considering.

At Mercer & Hole we work with many organisations, charities and businesses, to provide outsourced financial support from the production of year end statutory accounts to a full book keeping and payroll service. This service provides a team of highly skilled professionals for the times when you need them. If you would like to discuss any aspects of outsourcing please contact myself or my fellow partner, Ross Lane.

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