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Anisha Chaudhuri

Senior Manager, Advisory and Business Development

Charities Aid Foundation

Key priorities for charities amid rising operational costs

With multiple interconnected crises causing huge uncertainty and sharply increasing operational costs, it’s likely that your charity’s finances are feeling the strain.

Your first approach may be to look at cutting costs, and this is helpful, but putting together plans  with medium- and longer-term considerations is equally important. This is particularly true for smaller charities that are already operating on tight budgets.

Some of the top priorities for coping with rising operational costs and building longer term organisational resilience may include:

Support your workforce

Protecting yourself against rising costs starts with supporting your workforce. Charities are driven by people – and your people protect your purpose and help achieve positive impact. Crises periods are often accompanied by attrition and lay-off, but it’s hard to get good staff back once they leave and you find replacements.

Increasing wages to help support your workforce as they cope with high inflation is the obvious solution – and it may require you to dip into reserves in the short term.  However, if you’re not in a position to increase wages, there are non-financial ways to support your staff to be considered. This can include flexible working, setting up hardship funds for vulnerable employees to access, employee assistance programmes, partnering with other charities to provide and signpost staff to external resources and help, or other measures listed in our article on supporting staff.

Most importantly, it’s not about simply making sure your staff are doing their job, but ensuring your workplace culture provides a positive, empathetic, and inclusive environment where people feel fully supported. This may be achieved through workplace wellbeing initiatives, staff benefits and peer support.

Diversify your sources of income

Reassessing the diversity of your income is crucial when your finances are under strain. As well as the number of sources you have, consider each one’s attitude to risk. Individual philanthropists may be more willing to support more experimental activities or core costs, corporates or governments and councils may be more cautious in terms of risk, while legacies and earned income can usually be assigned freely.

Ensure you have a good range of sources across the different donor categories, a  number of donors within each category, and different options through which donors can support you to  spread your risk and cover different costs. Also, consider targeting new categories of donors, such as young donors in addition to traditional donors who have been supporting you, who may be conscious and strategic in how they give. Payroll giving schemes are a great way to attract new and upwardly mobile donors who may land up becoming your champions over time.

Consider especially, the level of reserves your charity now needs to maintain given high inflation and what sources could be leveraged to maintain healthy reserves.

Find out more in our article on what to consider when diversifying your income.

Collaborate or share resources with other charities

Where possible, charities may consider forming partnerships and alliances to coordinate their efforts, share costs, resources, and expertise to maximise income.

Consider the ways you could pool resources with others. It may be sharing spaces, splitting roles such as finance or operations managers across charities, or benefitting from economies of scale when buying equipment or supplies. Joining hands for campaigns and advocacy efforts may amplify your key messages while talking resource constraints.

A useful resource is the Charities Buying Group, which offers a range of buying agreements, and Can Mezzanine and Impact Hub offer coworking spaces and other resources for non-profit organisations and social enterprises.

You may also explore strategic partnerships with donors. Businesses could be encouraged to provide equipment or volunteers for service delivery or capacity building initiatives for charities.

Strengthen decision making

When charities are under severe strain, leaders often need to adapt quickly which may mean key changes to organisational strategy, service delivery or ways of working. Unless you have a robust decision-making policies and structures in place, mission-drift is a risk.

Whether you’re looking to start a new service or shift focus, it’s vital to ensure your intentions and actions are permitted within the scope of your governing documents. Expanding your remit may well be possible but there must be a process and documentation to justify the decision.  To ensure an effective decision-making process, you may wish to consider:

  • Streamlining processes to allow for efficient decision making
  • Ensuring decisions are well-documented and communicated internally and to relevant external partners
  • Putting checks in place to ensure your decisions align with your core purpose and governing documents