Helping you prosper

Dealing with financial pressure

Financial pressures are currently intense for charities. Funding applications to potential funders face all sorts of bureaucratic minefields. How should charities face these challenges? 

Due to the severity of the pressures faced by charities due to the pandemic, funders are being inundated with requests for support. They only have a finite amount of funds to help charities, so their selection process has become a lot harder. The best way a charity can increase their chances of success, is to be selective in which funders they approach. Lots of pictures and examples help to showcase and demonstrate to funders that the money will be used to great effect. Answer questions fully and be very clear exactly what is being asked for and how the money will be used. Funders often do not like to fund ongoing costs, like light, heat and core staff wages, so the charity needs to demonstrate what the funds will be used for in a very clear and concise cash flow forecast. This shows good financial practice but it's also easy for funders to see what they will be funding. Another way to increase the charity's chances is to not send the same application to everyone. Tailor it for each funder and make sure examples and cases meet their funding objectives. You want the funder to feel passionate about you.

 

With the above pressures, charities need quick decisions. How can charities cope when responses to applications are slow?

In the current situation, cash can run out very quickly. Donations are not coming in as much as they would have and the need for quick decisions is very important so that charities can then decide what their next move would be. Funders often have a rigid structure in place as to when board meetings are conducted and when decisions are made and how quickly they can release funds. To help the process, funders can be flexible but they still need to ensure good governance. The charities should also understand that funding decisions involve many people and often its not possible to make quick decision. Charities should have a funding strategy in place to ensure that they are not overly reliant on any one source of income. They should have a plan B and C to fall upon if they are not successful in receiving a particular funding application. Some practical things a charity should do to cope, is to do a detailed cash flow on a week by week basis so that they can forecast as far as possible whether there is going to be a cash emergency. Have a cost cutting strategy so that that only critical expenses are incurred. Approach other funders at the same time so that you spread the risk. Establish how much of the reserves (if you have any) can be used to get you through the tough periods. 

 

How should a charity assess a funding deal/funding terms? What is reasonable and what isn't?

Charities need to look at the terms and conditions very carefully as there may be reporting requirements and also outputs which they need to achieve, failure of which could be very serious. The management team at the charity need to go through these and assess exactly how they will adhere to the terms and if they are achievable. Reasonable terms would be those that are within the charities reach and abilities and not overly costly to achieve. Unreasonable ones are maybe ones that are more geared for large charities where they may have the expertise inhouse which small charities may have to pay for, which can defeat the objective. 

 

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