“Futureproofing finance” feels harder than ever with the combination of continued high inflation, global political uncertainties, domestic political shifts and changing funding landscape, including the seismic cuts in Official Development Assistance.
Need for the services and support charities provide is growing, at the same time as funds available are being squeezed from all sides. For many charities that I speak to, holding income flat year-on-year now feels like an enormous achievement.
At the same time, holding costs flat year-on-year for the same level of delivery feels impossible. For many, the debate is whether their funding and operating model remains viable or whether they can be changed quickly enough to survive.
Diversification of income has become increasingly important; organisations are constantly scanning for new restricted funding opportunities, in an increasingly competitive space, alongside tracking unrestricted income stream trends with a need to adapt fast to changes in income.
Finance teams have always supported income generation. Managing fundraising pipelines isn’t new. But replacing large multi-year institutional grants or adapting to structural shifts in unrestricted income or contracts isn’t easy.
Continued delivery of strategic priorities involves thinking about how to package planned work in different ways that meet new partner agendas.
Minimising staff churn and retaining committed and valuable colleagues requires flexible thinking about how to recover costs of existing team members from new funding or helping them adapt what they do for different funding objectives.
And building relationships with new funders, partners or customers takes time and effort. Many work on annual grantmaking or budget timetables and/or have protracted onboarding processes even once work is seemingly won.
Forward planning
All of which makes forward-planning for future periods, without visibility of funding, a tricky balance of risks. For me this has emphasised the importance of scenario planning with two clear aspects.
Firstly, understanding the range of possible outcomes to inform how quickly cost base change is needed, or building a case to hold your nerve and for how long, to avoid short term disruption/loss of delivery capability.
Secondly, clear articulation of the trigger points for taking action and what that action will be. Most organisations have trimmed costs repeatedly over recent years, for many there will be a limit to how much more “salami slicing” is possible and further cost cutting will require a fundamental look at the operating model, both what is delivered and how.
In mission-led organisations decisions about what to stop doing or change are always tricky. Beginning the thinking before you hit crisis point and it’s just a theoretical set of levers that might be pulled can be helpful. It also helps with building the case for holding your nerve as it gives leadership and trustees confidence that there is a plan B, C or D.
Of course, technology has a role to play: a good CRM, reporting and tracking of pipeline opportunities to ensure one source of truth; AI products that support bid writing or save staff time and effort across their day-to-day work; financial reporting tools that enable timely and impactful reporting to aid decision-making.
But a tightly balanced budget can make it hard to progress technology investments. So, agreeing ways of working with others involved in fundraising becomes really important.
Agreed rate cards, budget templates, agreed targets for cost recovery, clear cost allocation/apportionment methodologies and a mechanism for tracking resource allocation become essential. Finance needs to be in at the beginning of discussions and have sign off on the final budget.
So ultimately, I come back to the importance of building strong relationships across the organisation, clear communication on the objectives and outlook, and the need for agility with strong risk management.
I think we should also recognise that futureproofing finance can’t be done by the finance team in isolation; managing through financial uncertainty requires collective organisational effort.
Helen Wright is interim director of finance and planning at Bond
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