Ways to save money

With funds under pressure, every penny counts. Here are four ideas to help you save money, while reducing risk and improving processes.

Cutting recruitment costs

I was recruited by Macmillan through an agency. So when I arrived at Macmillan one of my first priorities was to see how the process could be streamlined. I knew there would be scope to improve efficiency and reduce costs. In my previous position at Islington council, I had successfully pioneered the outsourcing of recruitment to a managing company, and I was keen to see how the introduction of a similar system would benefit Macmillan.

My initial exploration, revealed that Macmillan used 60 different companies to supply agency staff. This resulted in over a thousand invoices being paid each year. A breakdown of these invoices showed that agency commission rates ranged from 15 to 28 per cent. We were paying out money sporadically to different agencies, with no consistency and without a long-term relationship with the recruitment firms. When vacancies occurred, recruitment took place on an ad hoc basis. This meant that we did not have an intimate relationship with the recruiters, they felt no loyalty to us, and we did not show it to them. The companies that were the first point of contact for many of our candidates, weren't familiar with us in an ongoing relationship that encouraged understanding, trust and mutual benefits. I was sure that this was not in Macmillan's best interests and decided to go to tender.

Following the tender exercise we appointed Step Ahead, a managing agent who we would work with exclusively. The advantages of this solution are many. Step Ahead value us as a client, and so have invested considerable time in familiarising themselves with Macmillan's priorities and values in order to field the most appropriate candidates. This ensures a high calibre of candidate, well suited to the positions. It has simplified the practice for Macmillan staff who need to recruit, as the procedure is now uniform across directorates and simple to follow.

In addition, we have been given access to a microsite, hosting a Macmillan "talent pool", where anyone wishing to work for us can register and receive relevant job alerts, a facility that can also be employed by internal candidates.

Perhaps the most pertinent incentive was financial. The new solution does not mean that we exclude other agencies from the process, but that Step Ahead deal with the agencies on our behalf, and negotiate commission rates with all suppliers. All temporary agencies now have a fixed-rate margin of commission, as do head-hunting companies, both of which are well below the market average. We have also made considerable savings on our advertising costs, as we have been able to take advantage of agency rates. Using the microsite and talent pool, are free and where internal candidates are appointed through them, there are no costs at all. Overall, we anticipate a saving of 25 per cent on recruitment costs and initial indications suggest it has proved popular with hiring managers and candidates alike.

Dave Sharp is head of procurement at Macmillan Cancer Support

---

Payroll outsourcing

The charity sector is undergoing huge challenges right now as a result of the economic downturn. In times like these charities need to be able to focus on their core competencies and maximise efficiencies in the business.

Tighter economic conditions prompt many organisations, including charities, to look for ways to reduce costs and outsourcing non-core activities such as payroll is an effective way to improve business efficiency and acquire a competitive advantage through partnering with a specialist provider.

Payroll is one of the most established outsourcing services and for good reason. With overtime payments, tax calculations and National Insurance Contributions to consider, not to mention the penalties from HMRC for getting it wrong, it's an administrative hassle that many could do without and one that can be easily separated from the rest of the business.

All organisations, whether charitable or not, require accurate and timely payroll. After all everybody expects to be paid on time. However, charities and other not-for-profit organisations, cannot always afford to employ somebody on a full time basis to perform recurrent admin duties. Employing staff with the correct skills can be an expensive business, especially when the charity has to compete with the private sector's pay scales. Likewise with funding insecurities also to consider, employing people is a risky business especially during an uncertain economic climate.

While an organisation could run its own payroll, it makes a lot of sense to employ a specialist company to perform the role, given their superior systems, detailed knowledge of payroll legislation, and overall wealth of expertise. These are resources that the average company does not boast and in most cases are over and above a traditional in-house payroll system.

For charities, outsourcing payroll also brings the additional benefit of diverting administrative time and costs to more direct charitable purposes. Direct costs such as software packages and payslip stationery may be easy to calculate, however, the hidden costs of time spent in processing the payroll and in interpreting employment law are often lost. Leaving this to the experts can help reduce company costs and free up time for staff to focus on strategic issues and key operational tasks.

Payroll outsourcing costs are negligible when compared to the expenditure incurred in processing payroll with in-house staff. Indeed budgeting for payroll is easy because most providers charge a set amount per payslip, allowing employers to calculate exactly what outsourcing their payroll will cost each time the payroll data is processed.

For those organisations still apprehensive about outsourcing their payroll, they can at least draw comfort from the fact that many providers have started to offer Pay-As-You-Go options. This flexible, low cost service provides a low risk introduction to payroll outsourcing and enables organisations to experience the benefits of outsourcing first hand on a short-term basis.

Charities and not-for-profit organisations face an increasing number of challenges nowadays. Most have been well established for many years but in the last decade have needed to change dramatically to comply with increasing operational and regulatory initiatives. In particular, as public funding has tightened, pressure on internal cost management has grown. Subsequently, charities and not-for-profit organisations have to look at where cost savings can be achieved whilst making sure their services and processes are as effective and efficient as possible. This undoubtedly includes the payroll process which is often perceived as an adminstrative burden.

On paper payroll should be a pretty straightforward process, but with statutory Sick Pay, Maternity Allowance, Paternity Pay and other employment legislation and tax implications to consider, running a payroll has become exceedingly complex.

Many are aware of the importance of an accurate payroll process and appreciate the problems of in-house payroll provision. However, with the less favourable economic conditions fostering a rethink in all aspects of administration, charities should not be afraid of outsourcing.

Dave Cooper is managing director of ESOS Ltd

---

Free HR Audit

Recent published surveys have revealed that charities are at risk of costly tribunals due to lack of compliance with changes in employment legislation.

Most charities start as small employers operating at the informal level with adopted policy templates or out-dated policies which do not reflect the practices of the charity, putting them at risk of potential legal claims. Frequently, human resources (HR) is seen as a function that provides a service rather than one that is involved in planning the strategic direction of the charity. HR is seen as an administrative task that is reactive, not proactive. Furthermore, limited financial resources are a major stumbling block and those that do have the money are usually not keen to spend on anything other than the charity's core objectives.

London-based consultancy, Hr4charities, has found through its free Audit Review, that many charities have the misconception that their staff are committed and motivated simply by their beliefs in the charity's mission or that they are too small to need professional HR support.

While people generally work for charities because they support their aims, this does not necessarily mean that they do not want to work in a formal environment, managed in a fair and consistent manner. More than other sectors, charities are dependent on the performance of their people. Therefore, if charities want to achieve their aims, they need to invest more time and effort in HR, moving away from being ''problem-solvers to problem-preventers''.

The Prevention is Better than Cure Audit Review provided by Hr4Charities is specifically designed to guide charities to full legal compliance and effective human resource management.

This free HR Audit involves an onsite HR review and recommendation service aimed at appraising the charity's existing policies and procedures. Thereafter, a full report is written to highlight the charity's current HR status; an action plan recommended for strategic development; the practicalities of implementing any recommended changes; and the support and assistance that can be offered before, during and after implementation.

Some benefits of the review include helping charities reduce the risks of litigation; evaluating and improving HR as currently managed; providing straightforward information on all the key aspects of human resources; assurance that the right policies and systems are in place; and providing free expert HR advice.

To take advantage of a free Prevention is Better than Cure HR Audit Review by Hr4Charities email anita@hr4charities.co.uk or visit www.hr4charities.co.uk.

Anita Wiafe is founder of Hr4Charities.

---

Using interim managers

Nearly a thousand charities in the UK shut between 2007 and 2008, according to a Charity Commission report published in March. In May, Russam GMS surveyed over 450 interim managers who work at a senior level in the UK charity sector to understand how the sector was faring in the recession. Of the respondents, 76 per cent reported that income levels have fallen in charities across the UK since the start of the financial crisis, 20 per cent claimed they were stable and just 4 per cent said they had increased. It is clear that a major challenge facing many UK charities is how to cope in light of reduced donations and tougher competition for funding, find new income streams and improve operational efficiencies to save costs.

Another challenge highlighted by over half of interim managers was that key business projects have been put on hold, 20 per cent claimed that recruitment efforts have been frozen, 15 per cent said IT investment had been put on the back burner and 10 per cent said that marketing plans had been shelved. On top of that, 74 per cent of interims also said that job cuts had already been made in the organisations in which they worked.

Charities are responding to the crisis in a number of proactive ways. Three quarters of interims stated that cash flow has been monitored more tightly since the recession started, some charities had involved trustees more closely in decision making and many were introducing better governance measures, along with new policies and processes. In 84 per cent of cases, interims reported that charities are increasing their fundraising efforts to meet the shortfall in charitable donations.

But, fundraising is just the start. It is not enough on its own to ensure a stable future for organisations in the current economic climate. One major opportunity for new income for charities is government funding, which is as yet, shows no signs of drying up. When Health Secretary Andy Burnham addressed the annual conference of the NHS Confederation this month, he talked of the greater freedom and flexibility that will be given to top performing NHS Primary Care Trusts to deliver more improvements, more quickly to their local communities to prevent disease and illness. Charities will play a key part in delivering these improvements and new opportunities and contracts will be up for grabs. However, to access these funds charities will need to be commercially ready and have the necessary skills in place to win tenders.

Many charities have already entered the world of tendering for business against commercial organisations and other organisations. But, for some, the whole process of bidding for contracts or renegotiating terms proved too complex and challenging, particularly for charities without the appropriate skills and commercial experience.

This is where experienced interim managers can help. They can work with charities on a project basis or part time basis to put together successful tender bids and negotiate contracts and grants and advise and implement a financial strategy that will help the charity's long term financial success.

Interims often come from commercial backgrounds and are experienced in delivering successful tenders. They also can be a highly flexible solution for charities that do not have the budget or need to hire someone full time or permanently. Interims can also deliver lasting value by introducing new business models and processes that can be used in the future by internal staff and a well managed interim assignment will always ensure the transfer to skills to permanent staff.

On a positive note, we are seeing signs of economic recovery. New projects which were on hold are starting up and we feel buoyed that we might be turning the corner. Charities need to act now and ensure they are ready for the upturn and this means having resources lined up to help them win new funding and secure their financial future.

Stephen Brooker is chairman of the charity practice at Russam GMS

Taken from Charity Finance