Many charities I speak to are asking the same questions: “How can we deliver the same service with less funding?”, “How can we access funding when there is increased competition for the same funds?”, “How can we make our charity stand out with increased competition for funding?”, “Can we afford to keep our team and give them a fair pay rise?”, or even just “Help! What do we do now?”
If the cost of service delivery at a viable level has risen beyond what can realistically be generated as income, there may unfortunately be some situations where a charity is simply unable to continue. However, before any decision is taken to close, let’s look at some alternatives.
If you don’t ask, you don’t get!
The first action I would always advocate in tough times is to ask for more; if you don’t ask, you don’t get! There is a possibility that funders may be looking for a new charity or project to support, providing a new source of reliable income and helping to alleviate some of the challenges. You can also ask suppliers if they are giving you their best price. Whilst there may be little chance of getting a better energy deal right now, many other overheads could be reduced with some careful review.
Are you getting the best broadband deal? Prices for loyal customers seem to go up every year (and often beyond inflation!) but, by shopping around, it is usually possible to secure much better rates. Is there a substantial saving to be made on rent and rates if the team can be accommodated in a smaller space by using flexible working practices?
It is also worth thinking about any fundraising activities that may have been put on hold during Covid and whether any can be restarted. However, do think carefully about how much these are likely to raise given increased costs and the possibility that the income may be lower than historical events.
For charities that are majority funded by donations, it is quite possible that income levels are being reduced as donors feel the squeeze from increased costs. Added to the increase in cost base, making the pennies go further is a key challenge right now. One potential quick fix is to look at likeminded charities that are offering a similar service and discuss delivering projects together. By working in partnership with a similar charity on a project, it is likely there will be a gain from economies of scale, allowing the combined charity partnership to deliver the same service for less.
Taking the partnership approach one stage further, it might become apparent that there is a huge synergy in service delivered by two or more charities who decide to formally merge to take advantage of this synergy. This is often a difficult decision to make if you have spent time building the identity of your charity but, with the current difficulties, the choice may come down to a simple question of do you merge and continue to deliver, or battle on until all reserves are depleted and your charity is forced to close? There are lots of formalities to formally merging and professional advice must be taken before doing so.
Take early advice to manage financial difficulties
If, after doing everything you can, you discover you are in financial difficulty, you must take professional advice as early as possible as this will help you determine what action to take. Four of our specialists are appointed to the Charity Commission Interim Manager panel and we have a strong Turnaround and Recovery team in our London office who can advise on the various options available.
Be there for each other
One of the biggest things we can do in the sector is to be there for each other – it is hard enough trying to deliver at the best of times, but supporting others can really help to keep the charity sector thriving. It’s clear that there are some tough challenges to work through, but taking a moment to look around and work together can often bring some real benefits.
Want to know more?
Download our 2023/24 Charity and NFP Outlook and turn to page 3 to read the article in full, plus much more. From our insights on the key issues impacting the sector to top tips about how to safeguard your organisation and updates on the latest regulatory issues, we examine what you can do to ensure your charity is prepared for the future.