UK charities are losing out on 6.84% of potential income each year, equating to £5.97bn annually, researchers have estimated.
Sagacity’s Missing Billions: Charity Edition lists a lack of oversight and poor processes as some of the main causes of lost revenue.
The report states that the lost revenue includes £776m due to human error, for example decimal points in the wrong place leading to undercharging.
It estimates that £597m is lost to billing issues caused by inaccurate or incomplete data and £139m of unclaimed gift aid.
The report says mistakes caused by third-party fundraising partners including missing data for new donors lead to lost revenue.
It also says money can be wasted targeting one-off donors rather than long-term givers.
Survey findings
Sagacity surveyed 50 finance and revenue professionals in UK charities and not-for-profits of various sizes.
One in five respondents could not accurately state how and where individual donations were spent, with around half worried this could put people off donating.
Three in five respondents said they could double donations if they could better prove where money is spent.
Meanwhile, almost half of respondents were concerned they could be in breach of Charities Act reporting rules.
‘Not fixing the leaky bucket is a wasted opportunity’
Scott Logie, chief commercial officer at Sagacity said: “The amount of money being left on the table by charities is alarming – especially regarding gift aid.
“HMRC paid charities £1.6bn last tax year, but our research indicates charities could have collected at least £139m more if they could more effectively match donors to donations.
“Amid the cost-of-living crisis every penny counts. Demand is soaring for charitable services like food banks, care assistance, and mental health support. Not fixing the leaky bucket is a wasted opportunity that’s preventing charities from providing more help to those in need.”
He said almost half of charity revenue leakage can be traced back to problems with data – presenting an opportunity for charities to close the gaps.
“To operate more efficiently and make the most of donations, charities must take a holistic approach,” he said.
“Look across the organisation at all levels to understand where issues might be occurring and how to fix them. From onboarding donors to working with partners. Long term, fixing leakage isn’t all about money either.
“It will also enable more accurate targeting, financial reporting and governance, improve the donor experience, and even attract more donors as they see where their valuable donations are spent.”
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