One in seven charity chief executives say their organisation is struggling to survive. Neil Poynton of the Charities Aid Foundation looks at the ways charities can nurture financial resilience.
According to a 2015 survey by the Charities Aid Foundation (CAF) and the Association of Chief Executives Voluntary Organisations (Acevo), one in seven charity chief executives say their organisation is struggling to survive.
And this rises to one in five among smaller charities.
So what can charities do to ensure their financial sustainability?
1. Start ‘inside out’
It’s crucial to start with a clear vision of what you want to achieve and ensure your governance is resilient to the current pressures impacting charities. Boards should adopt a critical friend approach in meetings to provide a supportive but challenging environment. Stay focused on the big decisions, rather than less important matters. Make sure the board, management team, staff, volunteers and suppliers understand your organisation’s objectives, high-level plans and timescales for delivering them.
2. Prune costs but protect future buds of growth
When funding begins to dry up, a natural reaction can be to cut costs. Whilst this can be effective, it can also damage long-term sustainability or growth. Assess the impacts of spending reductions to the income and resource sides of the equation.
A broad spread of income sources can be a hallmark of a resilient charity. It’s also important to consider the essential skills your organisation must retain. If your organisational structure needs to be more flexible, consider a portfolio or project-based resourcing approach. Funding partners will want to understand how your organisation is managing costs and developing or accessing needed expertise.
3. Nurture relationships with existing supporters
With the ever shrinking pot of statutory money, nurturing relationships with loyal donors is more important than ever.
Understand what motivates and inspires your current donor base. Ensure the rewards that supporters receive from their giving are clear. Take time to understand what makes them tick and forge a strong emotional bond. If a donor can touch, taste and feel your impact it will heighten their experience. Bring your impact to life!
A fundraising strategy should consider all existing and potential sources of support, including individuals, businesses, trusts and foundations.
4. Take a donor-centric approach to fundraising
The process of winning potential new supporters should be clearly mapped out. Describe your proposition, develop a compelling case for support, and research prospects’ needs to adopt a donor-centric approach. Your ‘case for support’ is especially important. Set out the problem or opportunity you exist to solve; how you tackle it; why your charity is perfectly placed to do this; the resources you need and what difference you can help givers to make.
5. Make giving to your cause easy
Optimise your website and social media channels to encourage and accept online donations, including from smartphone and tablet users. A 2014 survey of UK and Ireland not-for-profits found that online giving represented 15 per cent of individual donations. And over half of respondents reported that this figure is increasing.
Think beyond single transactions. Make regular giving easy by offering Direct Debit as an option.
6. Explore alternative paths to generating income
The charity sector as a whole derives more income through trading than it does from giving. If trading is feasible then consider and debate the pros and cons carefully and align trading activities to your charity’s purpose and existing core offering.
Other alternative sources of finance you could consider are crowdfunding, social investment vehicles, such as social impact bonds, or traditionally structured bank loans.
7. If applying for repayable finance, be well-prepared
Loan financing can accelerate receipt of ‘future’ income by achieving a planned outcome quicker. This could be to help bid for contracts, invest in new fundraising activities, grow capacity, buy or develop an asset, or perhaps launch a trading venture.
Arranged debt can help a project get under way, potentially unlocking and diversifying sources of income. But borrowing must never be taken lightly. The potential benefits and risks should be considered equally.
A resilient approach to all that you do will be well received by a bank. Engage with potential providers of finance early. Be prepared to answer questions. Responsible lenders have a duty of care not to provide finance if the deal does not ‘add up’.
To compare charity finance choices, their potential benefits and risks, download our free guide or call CAF on 03000 123 444 for a confidential consultation.
Civil Society News would like to thank the Charities Aid Foundation for its support with this article.
