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Charging for services – tackling the income shortfall

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Covid-19 has demonstrated how vulnerable many fundraising techniques are to the effects of lockdown. It has halted, or at least disrupted, fundraising events, door-to-door and street collections, and seen the (hopefully) temporary closure of many charity shops.  

Generating income, then, is even more of a challenge than ever for many VCSE organisations. With income under threat from all sides, perhaps it is time to look at all the potential sources of income for charities. So as fundraising income is depressed - in some cases possibly for years - how can charities make up for the loss in income? 

Fundraising strategy 

In the early months of the pandemic we published a helpful article on planning a structured funding strategy, looking at donations, trading income, contracts, grants and bid-writing. You can read that here.   

And as always of course, you are always welcome to contact our Community Development Team for funding advice. Call 01362 698216 or email [email protected]  

An uneasy concept 

As the financial impact of the pandemic bites deeper however, an additional line of thought is emerging – that of charging beneficiaries for services provided. Now, for many people in the VCSE sector, the idea of charging beneficiaries is instinctively distasteful. This is understandable. It may conjure up visions of a person at a food bank being asked to pay, or indeed being charged for any kind of service that has so far been freely provided. Many of us, then, may find the idea of financially or socially impoverished people parting with money for a service an uneasy concept to deal with.  

In the current climate it has to be acknowledged that charging beneficiaries has an important benefit – it brings badly-needed money in. With fundraising income at risk of drying up significantly, the income from charging beneficiaries may be a way to help an organisation balance the books. It may not be for everyone – but it should be considered, carefully and thoroughly.  

Deciding whether to charge beneficiaries for these services can elicit strong views, even outside of a pandemic. The significance of the decision, and the potential implications resulting from charging, varies enormously depending on several factors.  

It’s already common practice  

In reality, charging beneficiaries is much more common than we might think. It depends on how we view the distinction between something that merits free entitlement or whether circumstances enable a choice to be made. Think on this: 

  • Anybody who has ever been to an NCVO or Institute of Fundraising conference may have had to pay to attend  
  • Private schools charge their pupils - almost all independent schools have charitable status 
  • Relate, the relationship charity, routinely charges those they give one to one counselling advice to.  

The above are charities. We just might not be as used to looking at them - or ourselves in some circumstances - as beneficiaries. 

The pros and cons of charging 

Legally, charities are entirely permitted to charge beneficiaries for services they provide, and financial data for the sector suggests that there are significant benefits of doing so.   

A Small Price to Pay: the pros and cons of charging charity beneficiaries is a new report from nfpsynergy looking at the legal, practical, mission and pricing challenges of charging beneficiaries, as an alternative source of revenue.   

The report suggests that charging for services can be good for the bank balance and the beneficiary and, in these difficult times, that has to be an approach for charities to look at very closely.