Thursday, June 14, 2012

Finance Staffing Costs

Every organization spends money on staff who will do the financial accounting for it. These are skilled individuals with a passion for their organization. Frankly, they're not working there for the money; these people are talented enough that they could get better-paying positions at for-profit companies. But that's not where their heart is. They want to make a difference in the world, so they work for churches and non-profits.

My experience and knowledge says that there is a formula that can be applied to determine what an organization should pay for its finance staff. This formula is for the staffing functions only; there are additional costs for materials, computers, training, etc.

Here's the formula: 2% to no more than 2.5%

That's it. That simple.

Here's what I mean by that. Figure out what your gross receipts are for the past year. By gross receipts, I mean all revenues from all streams that came into the organization for the past fiscal year. Take 2% of that figure and you should be able to staff your finance department with that budget figure.

For instance, if your operating budget plus additional gifts totals $600,000, then should expect to pay about $12,000 for someone to manage the entire financial office: contributions, accounts payable, payroll, general ledger (which includes bank reconciliation), and financial reporting. At the most, you should pay $15,000 (which is 2.5%).

If you are paying substantially more than that, I think you're paying too much (remember, this is my opinion) unless your finances are incredibly complicated (and if they are that complicated, then you need to find ways to simplify them). Check out your financial operations, see how efficient and effective they are, see if they have the right tools to make them work faster and better, and then decide if you are paying too much because you don't have the right staff. Then, get the right staff people!

Lead On!

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