Helena Wilkinson, Partner, Price Bailey LLP and Vice Chair, Institute for Chartered Accountants for England & Wales (ICAEW) Charity Committee, shares some guidance on how the voluntary sector can look towards improving financial resilience.
One of the biggest issues facing charities today is how to manage their financial resilience and sustainability. This concerns not only income generation but also their activities, achievements and reserves - i.e their strategy – and how to deliver against it. One key element of strategy will be understanding their financial risk profile, markets and how to build their financial resilience. Considering where their current income sources come from, how predictable and reliable they are and where the future lies is a crucial aspect of any strategic plan, as without this charities cannot spend on their activities and so manage their finances.
Charities need to be innovative in their thinking, be prepared to take on new initiatives and new opportunities, this means that charities and their leaders need to keep abreast of new ideas and new ways of thinking, take planned risks, develop their strategy and manage change.
There is immense pressure on charities to raise funds - few are currently able to generate predictable income streams which do not rely on donations, grants and contracts which are not always predictable and are variable. Contracts can come and go, be won and lost. Charities need to manage and plan both increases and decreases in income, significant uncertainty over funds and actively solve their funding problems.
Income diversification is not about increasing your income sources to as many income streams as possible, but about identifying ways that your charity can generate more sustainable and resilient income. This will perhaps involve earning income from your charity expertise, generating income from partnerships and collaborations, funders, communities, trading or using volunteers to help deliver charitable services: these are some of the ways to face this challenge. Before you start the journey you really need to understand your current position and what opportunities are therefore available to you and assess which ones you should focus attention on.
Protecting and growing the charity’s reputation is equally as important in our current climate where news spreads quickly and can be devastating to an organisation.