Managing financial difficulties in your charity arising from cost-of-living pressures.

Like many of you, we receive many updates regarding the state of the voluntary sector.  In recent months there has been a rise in reports of failing charities, with at least one article predicting a loss of 40% of the sector in the next two years! 

Within our own organisation, we have received increasing enquiries about dissolving or downsizing charities, managing redundancies, and renegotiating contracts as the financial crisis hits.  Community buildings are considering mothballing premises to weather the storm and we are seeing more requests for help to find revenue funding than ever seen before. 

The cost-of-living crisis has also impacted funding. Competition for funding has increased with funding panels often vastly oversubscribed.  According to Charity Digital, donations have declined. Charities need to be innovative and find new ways to attract income.

One response has been to develop collaborative working across the sector.  Use of networks to drive partnership opportunities, sharing properties, cross border collaborations, negotiating better support from statutory bodies as part of the financing of activity, are all ways to reduce costs.

Financial resilience is on many peoples’ minds, and developing solutions is a matter for all of us.  So it is unsurprising that we have seen an increase in advice and support for managing finances. 

The Charity Commission recognises that many charities are facing difficulties from rapidly increasing costs.  Some charities are also experiencing increased demand, particularly those supporting people in need.  The Charity Commission have produced guidance for trustees, especially for smaller charities, to help when making difficult decisions about their charity’s financial position. Read more here.

VCSEs should regularly review and assess the risks faced by their organisation in all of its work and plan to manage those risks.

Risk is an everyday part of activity and managing it effectively is essential to achieving our objectives and safeguarding funds and assets.  This guidance from the Charity Commission outlines the basic principles and strategies that can be applied to help manage risks, and help set a risk framework that helps to:

• identify the major risks that apply to the charity
• make decisions about how to respond to the risks they face
• make an appropriate statement regarding risk management in their annual report

Research in 2023 by Blackbaud and Nepa found most donors do not know what difference their donation has made.  Only 43% knew whether their giving had improved people’s lives.  The report urged charities to “demonstrate the impact that your supporter has made”.

Fundraising platform iRaiser suggests that charities create a pitch  to demonstrate their impact and engage donors. The pitch should include advantages for the donor, but more importantly, information on how the donation helps your cause, showing what precisely it provides. 

Moving forward we must be bold and creative but ultimately we must work together to develop solutions. We must work with each other, with funders and statutory bodies to ensure that we all understand the issues the sector faces. To this end Empowering Communities Partnership is developing a survey to help us explore what else we can do to support you in becoming more resilient in the future.  Please keep an eye out for this.

If you are concerned about any of the issues highlighted in this article, our team of experienced Community Development Officers are here to help. Call us on 01362 698216 or email office@communityactionnorfolk.org.uk