2020-03-23

COVID-19 and the Voluntary Sector: Responding to Tough Times

The recent Coronavirus pandemic is exceptional. This is not business as usual. Movement of people suspended, and fundraising from events going into freefall … most charities are deeply concerned. Some charities are seeing a ramp up of demand for their services, while for others, especially those who are paid by results, the lack of people using services is both critical to survival and worrying.

This article explores what your charity could do, in a practical way, to address some of the issues and help your charity through these turbulent times. It is written by Moore Kingston Smith advisors, in the spirit of trying to help your organisation now. Our consultants have all been practitioners before and understand the internal stress you are going through. This external perspective may help you.

You may need to cut back on costs quickly, and divert resources to helping those most in need. You may need to think differently and innovatively about your fundraising. This article may help you to think how to respond.

 

Strategic

Firstly, this is not business as usual. Charities should be working on scenario plans and putting in place contingencies. This involves asking great questions to unlock what is happening and what could happen. Trustees and management both have a significant role to play in this.

It is essential to get everyone in a space (even remotely) to talk about what to do and how to respond. There is no such thing as a ‘stupid question’ in these exceptional times. So allowing everyone to speak, coordinate their thinking, and pull in the same direction may be the single biggest thing you can do to get through this emergency.

Humanitarian aid organisations typically go through a simulation once a year to show how they will respond to the next big emergency. The key learnings are typically that everyone must know their place and what is expected of them. Everyone has a piece in the jigsaw and a voice in the response. Secondly, you need clear and frequent communication. Finally, RAG (Red/Amber/Green) critical services and focus on keeping these going – stop non-essential work.

Fundraisers need to step up and find ways to deliver different income streams and be innovative. They need to keep the general public aware, but ask clearly for the funds they need to survive.

Finance staff need to get management reporting out quickly. However, we can only do this effectively if we have a solid infrastructure and good management information to do this from.

Many charities will struggle to understand how to respond to the Coronavirus pandemic. Equally some are prepared and know exactly what action to take. Reach out to close colleagues and your advisors to get help to see you through.

In the last downturn, many charities turned to re-writing their strategy and kicked the can down the road, rather than deal with the issues at hand. Take action now, rather than later.

The big thing though is mindfulness, giving your organisation proper time to think and not just react. A report written between Barclays Bank and Cass Business School highlights this: Charities in a Dynamic World[1]. It was written for times such as these. It may just provide you with some of the smart questions to ask.

 

Working From Home

The fast-moving coronavirus spread has exposed many charity’s systems, policy and procedure.  Many staff have been asked to work from home, and yet IT infrastructure hasn’t been upgraded to facilitate this. For example, we often work with client who can’t make payments unless someone goes into the office. How are they going to do that when movement or people is in lockdown? Not to mention putting staff at risk of catching the virus unnecessarily …

As part of planning you need to ask about how people can work flexibly and work from home. IT staff should be able to help you and there are many great electronic online systems: Zoom, Skype, and Jitsi to name but a few. Microsoft and Google are both offering free tools to charities to help you work from home and coordinate your work better, take advantage of this now.

Working remotely is a skill and many are not used to this. Give guidance to those who have not done this before. People need to work and take regular breaks, keep in contact with others, and have good quality systems to do this.

The coronavirus pandemic may enable us to appraise our future working patterns and develop a more flexible workforce. For example, one where finance doesn’t always have to be the only party who can’t work from home.

The sector may be able to sense and seize the opportunity of greater remote working, meetings and conferencing and not travel so much in future. An upside from a poor situation.

 

Stakeholders and Key Funders

As part of your contingency planning identify your potential stakeholders – beneficiaries, clients, staff, funders and the broader spectrum of interested parties – and discuss the needs of each. What response do you need from each and how will you manage and deal with each during the pandemic? Good stakeholder mapping can help you.

With your funding, look at your income streams and identify which are at risk? Consider your reserves, are they sufficient? Work out the profit and loss from each activity stream before and after applying overheads to see the true picture. Look carefully at cashflow.

It will also really help to keep your key funders up to date with how you are managing your response. Many key funders (government and private) have flexibility. They may be able to upfront payments or ensure core funding is provided even if services aren’t being delivered. They will be sympathetic to the fact that other income streams may have dried up.

The author of this article once had to re-negotiate nineteen contracts to keep an organisation alive. The funders were so helpful once issues were clearly explained and the organisation survived and thrived after this.

In a more positive way, you may need to ask how your organisation can mobilise to provide a community response; playing a greater role to help those most in need; the elderly or frail for example. This is what non-profit organisations did following the Grenfell Tower disaster, we have community links which will become critical in future.

Talk to your key stakeholders and keep them informed what is happening … they will thank you for it and understand you are in control.

 

Money and Systems

Similarly, Trustees and Senior Management are getting worried about how much money is in the bank, and what income looks like this year. They ask for management information, which often isn’t available. Its stuck in a spreadsheet city … charities can’t get the management information out and rely on staff to do this using complex spreadsheets; which often takes weeks.

Its not only charities but also businesses that are going through a massive shock at the moment. What’s our cashflow? Many charities need to know quickly to survive…

We need much better systems and process and ‘fast close’ methodology for the future. For now, we need to know that information is good enough. This means ensuring processing doesn’t wait until month end, and is good enough to press the button and see the financial picture at any given point in time.

Another example. We may potentially need to fundraise quickly to help our clients, but if we can’t see how much money we have to invest in a fundraising response how can we do this?

So this is a rallying call to all charities – support staff need to step up during this crisis, so that people can work from home and we can get information to run our organisations quickly and easily.

When the dust settles down, charities and nonprofits in general will need to spend more money to improve their infrastructure. Trustees will balk at the cost, but this is not a nice to have … it really is a necessity and this emergency will shine a spotlight on those who have not invested.

 

How Can you Respond to Falling Unrestricted Funds?

In reality, there are only a few ways you can respond. We identify several ways below:

Manage income streams effectively: Firstly, your charity needs to look towards securing its key income streams. Keep reforecasting every month through these difficult times. Research at Cass Business School has highlighted that predictable income streams are everything, without this, charities focus on survival alone.

Mobilise fundraising and get them to potentially look at fundraising from a different angle. Be clear in your messaging and asks to corporates, high net worth individuals and the general public. Talk about the issues and the challenges as well as the positives.

Also, identify ways to keep existing income streams going through clear communication. You may need to invest to achieve this.

Develop good cost recovery practices: From our advisory work we see that about one third of all charities don’t understand their overheads, or the profitability of activities (whether they make a surplus, or generate a loss after allocating overheads). This is money you should be able to claim from donors, especially with emergency grants. Equally, how can you make a decision on which services to ‘stop’ or ‘hold back on’ if you don’t understand how much money they create; or what the impact of that service is.

Seek advice to help calculate this correctly and maximise your cost recovery. Know what activities really cost and be able to make decisions from this. Also address the sign off of grants to ensure any subsidy you give is transparent and a good use of reserves.

Focus on cost reduction: Get on top of the numbers and work through budgets and reforecasts line by line. Hold back on unnecessary expenditure, while protecting your infrastructure and revenue generation.

If you eventually need to look towards your work force, asking people to downsize or take unpaid leave can be a powerful way to hold back costs.

Eventually though, if you need to cut costs then cut once and deep to protect the organisation. Seek legal advice to ensure any changes are made appropriately.

Manage your reserves effectively: Look towards how you use reserves to work through any issues – carefully investing to navigate the choppy waters (more below).

Focus on efficiency and re-imagining your organisation: There may be other longer-term things your organisation can do, like focusing on greater efficiency or re-imaging your organisation. These are not short-term measures and take time and investment to implement properly.

All of this work needs to be built into a good response plan and shared across the organisation from trustees to volunteers.

 

Ten Hacks to Get you Through

So in wrapping up this short article we offer ten hacks to get you through these tough times:

 

Hack 1: Focus and Prioritise Ruthlessly. Stop all pet projects, and non-critical work. Focus on your core work and focus all effort and resource on this. Consider the impact versus profitability of different activity streams and stop work which has low profitability and no impact. This is hard to do, but critical to any response.

 

Hack 2: Really challenge decisions. Have robust and open conversations about what is really going on. Get current management information on the table that is not weeks out of date. Ask stupid questions and take the best advice you can get.

 

Hack 3: Know your margins and costs. Many charities simply don’t know the profitability of service lines, their overheads, or how overheads are applied to service lines. Some organisations simply don’t know their business model or costs. Get this sorted now.

 

Hack 4: Use reserves appropriately. Review your reserves policy and how this works. Look at spending potentially ‘rainy day’ funds to get you through issues or invest. Understand what money you have available in reserves and how you can use this. It may also pay to look at how you can use restricted funds; could these be used within the purpose given for but in a creative way to take the pressure of funding. Think creatively.

 

Hack 5: Finance needs to step up. Finance needs to step away from day to day transaction process and help the organisation to see. It needs to be a more flexible workforce, coordinating with the rest of the organisation as a business partner. It needs to step up to provide good quality management information.

 

Hack 6: Get management information right. We need to have good quality financial and non-financial information to help the organisation to see. Charities regularly say that management information is for ‘decision making’ – what decisions are you making? Be clear. Information needs to be forward looking, timely and focused on the important. It needs to be good enough to take tough decisions and not weeks out of date.

 

Hack 7: Cash is King. Get on top of cashflow and reporting on it. Produce frequent cashflow information.

 

Hack 8: Don’t ride a dead horse - dismount! If you find yourself in a situation which is impossible for you to see a way out of, then seek professional advice. It may be that an external pair of eyes can help turn an organisation around. Equally it may lead to a more orderly close out process. Seek help early.

 

Hack 9: React and evolve. Fail fast, pivot, try again. In these tough times, keep listening and learning. Focus on what’s important. And if something isn’t working, stop and rethink your direction.

 

Hack 10: Have energy and resilience. And the final thing is to have energy and resilience for the long haul. The Coronavirus epidemic isn’t going to go away soon … it will even be back next year! Keep in touch with your staff and ensure they keep resilient through these exceptional times.

                                                                     

In Summary

We exist for the poorest and those who can’t support themselves. We deserve profound thanks for our work on helping those in poverty through this. Thank you to each and every one of you working in fundraising, finance and support teams across the world; you are all unsung heroes in the upcoming response.

Recent issues will expose the fragility of many in the sector. I want us to sense and seize the changes we need to make, to become better, and more resilient, organisations.  

We hope we have helped you to see what we may need to do and how best to respond.

 

This article was shared with us by Mark Salway, MD Moore Kingston Smith Fundraising and Management. 

Mark is Managing Director at Moore Kingston Smith and Head of Fundraising and Management. Highly respected across the not for profit sector, Mark has extensive charity and industry experience gained both in the UK and abroad. His work with charities, government, NGOs and the UN includes humanitarian reform, the elderly, homelessness, children’s welfare, dementia, water and sanitation, sport and developing social enterprise, including eight years as finance director at Care International UK.

Mark can be contacted via the following: 0780 350 2391, skype: mjsalway, email: msalway@mks.co.uk