Why non-profit CFOs need to implement digital transformation​

Digital transformation is sweeping through organisations, driving efficiencies, speeding up processes, cutting costs and helping them to focus on what they do best.

New technology can sometimes be associated with a reduction in headcount. However, organisations – including charities and non-profits – are finding that it can actually free up staff to focus on the jobs that only humans can do.

Meanwhile, there’s increasing pressure on non-profit organisations to justify their budgets and spending by demonstrating that they are having a real impact in their particular area.

Among other benefits, new and rapidly evolving technology allows them to assess their performance and decide where and how they should be focusing their attention.

Read this article to learn why digital transformation and adopting new technology is vital for non-profits and what CFOs need to do to lead the way.

We start with five reasons why it can benefit your organisation, before painting a picture of what a digital revolution looks like.

Then we feature a series of steps that will help you start your own digital transformation at your non-profit.

1. Adopt flexible working and better collaboration

For David Barker, founder of Thrive, a specialist consultancy that supports charities and non-profits, there’s one word to describe the benefits of new technology to these organisations and that’s “huge”.

He says: “It means increased efficiency and increased productivity. It allows staff to work flexibly and remotely, something that a growing number of talented people expect from the charity sector, as they would from other industries, these days.

“It enables teams to collaborate more effectively and to work smarter, as well.”

2. Stay compliant with regulations

New technology makes it easier for charities and non-profits of all sizes to ensure they’re complying with laws and regulations such as GDPR. Very importantly for this sector, it enhances their ability to raise income.

“It enables organisations to adopt more efficient and effective working practices and to achieve better management information and insight, so they have a better understanding of their fundraising, expenditure and donations,” explains Barker.

Noting that millennials are now the fastest-growing potential donor base, James Qua, senior manager at Deloitte Consulting LLP, wrote an article in the Wall Street Journal.

He said: “Millennials typically express a strong desire to understand the impact of their contributions both at the time of investment and in the future, so they typically demand increased transparency from organisations to which they contribute, whether their gifts take the form of time, money, or expert advice.”

According to a recent survey by Philanthropy Impact, a membership organisation working to inspire philanthropy and social investment, funding was the top concern for 84% of charities, while GDPR was cited by nearly two thirds (65%).

“As we enter the new decade, we believe that new technology and digital transformation will bring multiple benefits for charities, including new income streams and more secure and transparent communication with supporters and beneficiaries, allowing charities to operate in a more agile and efficient way,” says Matt Smith, a consultant at Think Consulting Solutions, an international consultancy that helps charities and others with fundraising.

“However, these advances will not be without risk, or barriers for organisations to overcome.

“It is essential that finance leaders are at the heart of breaking down these obstacles and empowering teams to think and deliver in more creative ways.”

3. Make accurate predictions using data

One of the biggest opportunities offered to CFOs and others by technology such as artificial intelligence (AI) and big data is the ability to look forward and to make accurate predictions. In the charity and non-profit sector, this is more important than ever.

In a recent report by Sage, CFO 3.0: Digital transformation beyond financial management, Sabby Gill, managing director for the UK and Ireland, says: “Finance professionals used to look in their rear-view mirror to provide business information—always looking behind them while trying to steer in front.

“The introduction of predictive analytics is all about understanding data and looking forward, rather than back.

“Today’s CFO is transforming into a real-time analyst. Tomorrow’s CFO will be a visionary. This is CFO 3.0.”

The particular challenge for non-profits and charities looking to implement this change is that unlike most other organisations, their focus is on helping others rather than making money for themselves.

4. Work more efficiently after investing time on implementation

Based on his experience, David Barker of Thrive believes many charities and non-profits can find the prospect of this technological change daunting.

“There’s often a belief that it can be overly expensive or even unaffordable,” he says. “My advice is don’t buy a Rolls-Royce if a Ford Escort will get you from A to B.”

And there’s the point that investing in the right technology can save money in the long run due to better productivity and more efficient ways of working.

Organisations will have to invest time, according to Barker. He says: “You must ensure that the right level of internal resource is put to this change – either in terms of project management or staff training in new systems.

“So often technical implementations fail due to the internal culture not being considered or staff not being taken on the journey.”

He advises leaders of charities and non-profits to scope out the digital transformation project thoroughly before embarking on it.

“Time invested up front will reap rewards later and save some of the pain,” says Barker.

“Walk the talk, too. Ensure that the top of the organisation gets stuck in and acts as champions, advocates and doers – not just desk thumpers when things become challenging or go wrong, which they will.”

5. Acquire new talent

Digital transformation and talent acquisition can form a virtuous spiral for many non-profits.

In finance teams and other departments, talented people will be attracted to organisations that are benefiting from digital transformation and similar technology rather than those that are struggling with ageing, legacy systems.

Conversely, you can use this new talent to drive further technological benefits.

There’s one asset that charities and other similar organisations have that’s not available to commercial organisations: volunteers.

“Something else that we learned along the way was that this new reality that we were starting to adopt within our non-profit was attracting the very thing that we needed: volunteers who had digital skill sets and who were excited to help us transform,” Dr Gloria Horsley, founder of the Open to Hope Foundation, an open community where people can find hope after loss, writes in Forbes magazine.

“Many had even led their own companies’ transformations and were eager to help other organisations do the same so they didn’t have to reinvent the wheel or experience setbacks.

“The transformation assistance we received included showing us how to migrate our files, selecting the optimal software for our processes and training the organisation on how to think digitally.”

The sector needs to invest in the best people with recent, first-hand experience of delivering impactful digital transformation and fundraising innovation, argues Matt Smith. “Charities must now have one eye on this ever-changing landscape, as the pace of change is due to ramp up even further.

“Following thought leaders on social media and partnering with disruptive and socially conscious companies will become even more essential.”

He adds: “The 2020s will present a challenging and ever-changing fundraising and technological environment, but charities should be energised by these opportunities and by the chance to have a greater impact for their supporters and beneficiaries.”

What digital revolution means in practice

Just imagine that you have your database of donors in a CRM system and you have to add your email list manually via an Excel spreadsheet. Donations are processed separately elsewhere.

In other words, there’s a lack of coordination and integration. The system is time consuming and vulnerable to human errors.

Sound familiar?

Well, a digital transformation programme and new systems, including modern financial management software, could put paid to these issues. Here’s some examples of how.

Improved tracking of donations

With a new system, all these databases and procedures are integrated, so donations are tracked and correctly managed and attributed. Supporters are identified and receive communications that are accurate and appropriate.

Not only does this automated system mean your supporters don’t receive a request or reminder about donations when they’ve just made one but it also frees up your staff to do the kind of more creative, strategic work that is best left to humans.

Making donations gets easier

Donations can be made easier and more efficient with buttons on emails, your website and through social media.

Supporters and donors are increasingly expecting the same high quality of customer service and ease of interaction with their charities as they experience with online retailers, banks and travel companies.

If, as a charity or non-profit, you can use digital technology to replicate this level of service, you can increase engagement and donations, and gain a competitive advantage.

Stepping back from the question of emails, this new technology will also help you to assess whether this is actually the best way to solicit donations.

Would it be better, for instance, to focus more on social media or a paid advertising campaign?

Evolving payments and donations methods

“The Royal British Legion’s 2019 Poppy Appeal raised £780,000 from over 146,000 donations via 900 contactless terminals, an increase from £211,000 in 2018,” says Matt Smith.

“We expect this to be one of the major areas of technological investment for charities in the next three to five years as cash disappears from potential donors’ pockets.”

He adds: “Additionally, developments in client relationship management tools and email service platforms will greatly enhance the onward supporter journey.

“Charities will be able to more easily segment and tailor their journeys across multiple channels and offer different content based on a supporter’s location, previous actions and preferences.

“This kind of segmentation will become far more widely available and cheaper, meaning charities with smaller budgets will have access to many of the same tools and engagement metrics previously reserved only for the largest organisations.”

Steps to take to implement digital transformation

1. Get buy-in from management and trustees

As the CFO, not only will you have to get the rest of the management onboard but also the trustees too. This is a major piece of change management that will require the buy-in and support of the whole organisation.

Mistakes might be made during its implementation, so it’s important everyone understands why it’s being introduced and is clear on the significant benefits that it’ll offer in the long term.

2. Carry out an organisation audit

Before you implement a major technological change, you’ll need to know where you stand now.

You can lead on this change by carrying out an audit of the organisation, looking at the current processes that the finance team and others are using and how they’re connected – if at all.

You’ll also need to identify the digital and manual processes involved in identifying sources of funding, marketing, managing donors and supporters, supporting projects, budgeting and keeping track of expenditure.

3. Look to the future

From this you can begin to think about what, ideally, you’d like things to look like in, say, five years’ time.

What will you be able to do then that you can’t do now? Where are the pain points or the laborious manual processes in your systems that you’d like to eliminate?

What opportunities are there that you currently can’t exploit but you could do more about if your staff had more time, more actionable information, more knowledge and greater insights?

4. Start small

Begin by identifying and introducing small changes, and allow the finance team and other departments to experience the benefits.

Perhaps they’ll find they’re spending less time manually inputting data or having to cross reference Excel spreadsheets and databases, for instance.

In a sector where turnover can be quite rapid, staff onboarding and payroll is a good place to start.

5. Communicate externally

Talking about your digital change programme externally as well as internally will generate buy-in from donors and supporters.

Clearly explaining the benefits that it will bring to the cause you’re focused on, complete with examples and case studies, will enthuse them.

It can also encourage help and support on a pro bono basis from experts who are sympathetic to your issue.

Editor’s note: This article was first published in February 2020 and has been updated for relevance.