# Invest In Infrastructure To Escape The ‘Starvation Cycle’, Warns Leading Nonprofit Sector Strategist
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-12-06
Category: INVESTING
Category URL: https://financedigest.com/category/investing
Meta Title: Why Charities Must Invest in Infrastructure: Expert Insights
Meta Description: Mark Salway warns of the consequences for nonprofits that fail to invest in good finance systems, risking missed opportunities and decreased impact.
URL: https://financedigest.com/invest-in-infrastructure-to-escape-the-starvation-cycle-warns-leading-nonprofit-sector-strategisthtml

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_By **Mark Salway,** Sector Advisory Lead for iplicit, discusses the ‘trap’ that_

_catches out many mid-sized nonprofit organisations_

Charities that fail to invest in their infrastructure risk a downward spiral of cost-cutting, lack of investment and missed opportunities, warns a leading strategist for the nonprofit sector.

Without good infrastructure, charities will achieve less social impact for their beneficiaries and the environment, says Mark Salway, the new nonprofit Sector Advisory [Lead for award-winning accountancy](https://www.financedigest.com/uk-buyers-lead-interest-in-megacity-istanbul-accounting-for-21-51-of-all-property-enquiries.html "UK BUYERS LEAD INTEREST IN ‘MEGACITY’ ISTANBUL, ACCOUNTING FOR 21.51% OF ALL PROPERTY ENQUIRIES") software developer iplicit.

“Charities that don’t seize the opportunities offered by digital technology risk missing out on productivity gains from good [systems and processes](https://www.financedigest.com/solvency-ii-pushing-existing-systems-and-processes-harder-is-not-enough-for-compliance.html "Solvency II: pushing existing systems and processes harder is not enough for compliance"). Furthermore, their IT systems could be more vulnerable to hacking,” said Mr Salway, who was previously [Managing Director](https://www.financedigest.com/anya-libova-joins-apester-as-uk-managing-director.html "Anya Libova joins Apester as UK Managing Director") of Moore Kingston Smith, Nonprofit Advisory.

“These charities will also find it harder to re-invent themselves and have greater ambition in future,” he added.

[Accounting systems were a key area of risk](https://www.financedigest.com/accountants-risk-missing-post-brexit-opportunities.html "Accountants risk missing post-Brexit opportunities") for many charities: “They often have a perilously inaccurate picture of their finances. With the impending recession, good management tools and solid management information will be critical for the survival of many charities.

“Without these tools, [management and trustees will not have good information from which to take sound business](https://www.financedigest.com/finance-management-for-small-business.html "Finance management for small business") decisions.

“Over the years, I’ve seen a lot of charities struggling with the systems they have in place,” said Mr Salway, who lectures at London’s Bayes [Business School in advanced accounting](https://www.financedigest.com/making-your-accountant-an-invaluable-asset-to-your-business.html "MAKING YOUR ACCOUNTANT AN INVALUABLE ASSET TO YOUR BUSINESS") and taxation, and building financial sustainability. He is also currently researching there for his PhD.

“Getting accurate and timely [financial information](https://www.financedigest.com/overcoming-information-overload-in-the-financial-sector.html "OVERCOMING INFORMATION OVERLOAD IN THE FINANCIAL SECTOR") can be a huge blind spot for charities,” said Mr Salway.

“Too many of them fall into the trap of spreading themselves too thinly. They focus rightly on spending money to help people – but often to the detriment of [maintaining the infrastructure](https://www.financedigest.com/how-a-british-tech-brand-can-maintain-category-leading-position-and-continued-growth-by-investing-in-the-uk-people-and-infrastructure.html "How a British tech brand can maintain category leading position and continued growth by investing in the UK people and infrastructure") needed to run the charity efficiently and effectively.

“They often remove infrastructure costs from grant and contract budgets, rather than being transparent about what a [project really costs](https://www.financedigest.com/britain-delays-major-rail-project-hs2-as-costs-soar-again.html "Britain delays major rail project HS2 as costs soar again").

“This shortfall has to come from reserves, additional fundraising or from asking people to work additional overtime. It often equates to around 5-10% for each grant or contract.

“Charities often [hold back](https://www.financedigest.com/fear-of-failure-holding-back-british-entrepreneurs-new-research-finds.html "Fear Of Failure Holding Back British Entrepreneurs, New Research Finds") on infrastructure costs to balance the books. There is a lack of [investment in finance systems and reporting](https://www.financedigest.com/manchester-united-tanks-on-report-glazers-may-avoid-sale-with-new-investment.html "Manchester United tanks on report Glazers may avoid sale with new investment") tools specifically. So charities often end up with outdated accounting systems that underperform and deliver [poor management](https://www.financedigest.com/poor-user-experience-plaguing-wealth-management-firms-warns-radical-company.html "Poor user experience plaguing wealth management firms, warns Radical Company") information,” added Mr Salway.

Without an accurate financial picture, these nonprofits would then:

- [fail to spot opportunities to raise or save](https://www.financedigest.com/behind-ftxs-fall-battling-billionaires-and-a-failed-bid-to-save-crypto.html "Behind FTX’s fall, battling billionaires and a failed bid to save crypto") funds
- miss opportunities to spend money where it would do the most good
- fail to spot poor use of funds or – in extreme cases – fraud
- fail to hold budget holders to account for their expenditure
- fail to make [the crucial strategic leap from one growth curve to the next](https://www.open.edu/openlearn/pluginfile.php/632490/mod_resource/content/1/sst_ar07_10t_2.pdf) – with the risk of following their current curve’s eventual downward trajectory.

“Many nonprofits have stretched the tenure of their infrastructure far beyond its lifespan – so much that they no longer have the right tools in place. It can become a vicious circle of cost-cutting and under-investment. We call it the starvation cycle,” said Mr Salway.

He added: “Charities are often five to 10 [years behind their commercial counterparts because they haven’t invested](https://www.financedigest.com/cepsa-to-nearly-double-investments-over-next-3-years-as-profit-soars.html "Cepsa to nearly double investments over next 3 years as profit soars") in the correct technology. The opportunities that they’ve lost have been huge.

“The [commercial world](https://www.financedigest.com/certainty-in-an-uncertain-world-post-brexit-investors-turn-to-commercial-property-and-fixed-returns.html "Certainty in an uncertain world – post-Brexit investors turn to commercial property and fixed returns") closes accounts in five days, for example. Charities often take four to five weeks – but by that time, the information is well out of date. You can’t make informed [decisions](https://www.financedigest.com/uks-ofcom-delays-bt-fibre-pricing-decision-after-ceo-remarks.html "UK’s Ofcom delays BT fibre pricing decision after CEO remarks") based on that time delay.”

He added: “Systems should be able to slice and dice data quickly and [effectively](https://www.financedigest.com/how-can-network-operators-monetise-television-quickly-and-effectively.html "How can network operators monetise television quickly and effectively?") and enable staff to manage project reporting to funders quickly and with real agility.

“But with the old modular accounting systems that many nonprofits still use, you have to close the modules before you start to see the information. These systems are old and cumbersome.

“Real-time financial information is still a pipe dream for most charities and nonprofit organisations, and yet it’s so readily available.”

Good accounting [software should enable charities to produce the information they needed to manage](https://www.financedigest.com/struggling-banks-need-to-modernise-and-improve-software-quality-management.html "Struggling Banks Need to Modernise and Improve Software Quality Management") their finances – actual versus budgets and with good forecasting capability, without having to rework the data in Excel. Reworking could [lead to delays and a greater](https://www.financedigest.com/move-over-pcl-greater-londons-suburbs-take-the-lead-this-summer.html "Move over PCL, Greater London’s suburbs take the lead this summer") risk of error, said Mr Salway.

Charities typically have more complex accounting requirements than businesses because of the extra [regulations regarding accounting for restricted and endowment funds](https://www.financedigest.com/how-solvency-ii-transformed-itself-the-fund-industry-and-regulation.html "How Solvency II transformed itself, the fund industry and regulation") – funds which must be maintained for specific purposes. Nonprofits also need good fundraising and project tools to enable close control of critical information.

However, when it comes to accounting software, many nonprofits [face the same dilemma as their SME](https://www.financedigest.com/smes-facing-an-uncertain-future.html "SMEs facing an uncertain future") counterparts – the pain of making the big leap from entry-level systems such as Xero, Sage and QuickBooks to corporate ERP systems such as NetSuite, Dynamics and Intacct.

It can be costly, time-consuming and hugely disruptive for any organisation – charity or otherwise.

Mr Salway joined the nonprofit [sector in 2004 when he left KPMG after eight years](https://www.financedigest.com/2020-the-paradoxical-year-that-has-reshaped-the-future-of-motor-insurance-and-related-sectors.html "2020: The paradoxical year that has reshaped the future of motor insurance and related sectors") as a manager. Since then his work for charities has taken him around the world, supporting efforts in Ethiopia, Somalia, India, Kenya, the Middle East and East Asia. He has also worked extensively in the UK, helping hundreds of clients.

He has worked with charities and large foundations promoting humanitarian aid, help for older people, children’s welfare and education, the environment, animal welfare and freedom of speech. Key roles have included:

- Director of [Financial Sustainability](https://www.financedigest.com/cobots-in-the-financial-workplace-reducing-costs-attracting-talent-and-enhancing-sustainability.html "Cobots in the financial workplace: Reducing costs, attracting talent and enhancing sustainability") at Bayes Business School (formerly Cass)
- Acting CEO and [Director of Finance and Operational Support at CARE International](https://www.financedigest.com/adnami-appoints-jeetesh-luhar-as-international-sales-director.html "Adnami appoints Jeetesh Luhar as International Sales Director") UK
- Head of Finance and IT at Cats Protection
- Trustee at WSUP (Water & Sanitation for the Urban Poor)
- Treasurer and Trustee at Article 19 (defending freedom of expression and information).

Mr Salway has written key strategic reports for large grant-makers and foundations, as well as the United Nations Office for the Coordination of Humanitarian Affairs (UNOCHA/OCHA) and the European Union on the use of volunteers in humanitarian response.

He has coordinated long-term training for Age UK and other charity organisations through Bayes Business School. He [set up and established the Building Financial Sustainability and Re-imagining Organisations](https://www.financedigest.com/embracing-cloud-computing-how-and-why-organisations-are-set-to-invest-more-in-cloud-computing-in-2023.html "Embracing Cloud Computing: How and why organisations are set to invest more in cloud computing in 2023") course while at the business school.

Mr Salway is now supporting iplicit as Sector Advisory [Lead to help all charities benefit from better systems](https://www.financedigest.com/impact-of-new-cheque-clearing-system-discussed-at-leading-seminar.html "Impact of New Cheque Clearing System Discussed at Leading Seminar ") and good financial management.

He has more than 20 [years of sector experience](https://www.financedigest.com/2021-the-year-of-buyer-experience.html "2021: The year of buyer experience") in financial management as a finance director and treasurer. He has also implemented multiple [finance systems and has wide-ranging experience in process](https://www.financedigest.com/how-decentralized-finance-can-aid-in-the-acquisition-process.html "How Decentralized Finance can aid in the acquisition process") improvement.

Rapidly expanding iplicit was launched in January 2019. It now has more than 7,600 users in 52 countries – and is on track to [onboard more than 60,000 users](https://www.financedigest.com/getting-started-with-user-onboarding-tools-in-2022.html "Getting Started with User Onboarding Tools in 2022") by 2025. A significant percentage of its users are from the nonprofit sector.


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