A financial review published today warns that the sector faces a £4.6bn shortfall. Michael Birtwistle, senior policy officer at NCVO and co-author of the report, highlights ten steps charities can take to become more sustainable.

1. Understand your operating model

Do you understand how you generate income, what you are trying to achieve and how dependent your organisation is on certain sources of income?

2. Think about your market

Do you understand how your funding sources are evolving and whether these are likely to change in the future (for example, is your local authority likely to cut spending with voluntary organisations in the near future) and how certain changes would generate opportunities or threats your organisation?

3. Map your organisation’s capabilities and capacities

Do you know what your organisation can do and what it can’t do? Are there gaps in your organisation or weaknesses? What might you need to do if you were to take your organisation sustainable?

4. Consider what other types of organisations are doing

Have you identified whether there other organisations that you can learn from, whether that is because they have similar objectives or funding models? Could you work together with them?

5. Do not put all your eggs in one basket

Consider the range of assumptions that you have in your business plan and challenge your assumptions thoroughly. The future is unpredictable.

6. Factor in the impact of inflation

Do you build in the impact of inflation both in terms of operating costs but also future income generation? If not, what does your long term financial health look like once inflation is considered?

7. Understand the tax reliefs you receive

Does your organisation claim all the tax reliefs that it is entitled to and if you changed your funding model, would that impact on the reliefs that you can receive?

8. Map your assets and liabilities

Do you know what assets (financial, organisations, expertise or intellectual property?) your organisation has and what liabilities you have, for example, pensions? What future liabilities may changing your business model create?

 9. Think about your staff, volunteers and trustees

Have you considered their skills and what skills they may need for the future? Are you dependent on certain staff, volunteers or trustees? Are they over-stretched, if so, how long is this sustainable for?

10. Plan now

Carry out these plans now, do not wait for a change in your situation.

This is an extract from A financial sustainability review. The full report is available here.