The charity guidance `Improving your Charity Finances’ has recently been updated to make the information more accessible and easier to use, and we thought this would be a perfect opportunity to refresh on what this guidance covers and how it can help support your charity finances.
Initially issued in 2016, the updated 2024 guidance covers:
- Actions Trustees can take to improve their charity’s finances
- How to protect against financial difficulty
- What to do if your charity is insolvent or is at risk of insolvency.
We’ll also explore some of these areas in more detail below.
Trustees and Charity Finance
We talk about Trustee roles, responsibilities, and duties a lot in our Beyond Profit posts, and when it comes to managing finances, these duties cannot be underestimated.
Not only do Trustees have a responsibility to ensure that charity money is spent on your charitable purpose, but they also must ensure that the charity complies with restrictions on using funds AND that there is enough income for the charity to continue making a difference.
However, we know charities are underfunded, they have been struck by numerous economic events and market uncertainties, and charity managers are extremely stretched, so managing finances and being aware of every aspect and small detail of the charity’s financial situation is becoming increasingly challenging.
But it is vital.
Trustees have a duty to manage the charity’s finances and resources responsibly; this means as a Trustee, you are responsible for:
- Reviewing budgets and plans
- Reviewing financial risks
- Seeking professional advice
- Regularly checking that finances are getting better, not worse, and understanding the impact on your charity when financial difficulties do become apparent and there is a chance that your charity could fall victim to insolvency.
It is often due to these reasons why many charities are now looking to outsource all or parts of their finance function.
How to manage financial difficulties
If your charity finances are starting to look stretched, you can put in place strategies to mitigate risks, such as:
Minimising costs – are there any areas where costs can be reduced? Could you limit non-essential outgoings? Reduce administration costs?
Partnering with another charity – in some instances, joining forces with another charity may be beneficial to pool resources and boost funding opportunities.
Reducing services – no charity wants to do this, but by reviewing your charitable purpose and going back to your absolute core, can you reduce some services to reduce costs?
Looking for additional sources of income – tap into additional funding streams, grant opportunities, speak to your fundraisers, private donors, etc.
Reviewing charity funds and assets – can you use general funds or assets (with no restrictions) to support your charity through this challenging period?
Using charity reserves – if you dip into this, how much do you need? What is the long-term plan – you need to consider how this can be sustained in the future.
If your charity is struggling to pay its bills and debts are increasing, please make use of the `Insolvency Checklist` online, which asks a series of questions for you to analyse your charity’s financial position better and also provides further information on what to do if you think your charity is at risk of insolvency.
Working with the right support
As charity finance specialists, the team at Beyond Profit works with charities to ensure that finances are accurate and accounts are up to date, compliant, and contain all the relevant information Trustees require to meet their legal obligations.
We understand that managing and navigating your charity through a period of financial difficulty is challenging. That’s why we provide you with detailed insight into how the charity is performing, ensuring key accounting information is continuously available, so Trustees can be aware of any financial problems sooner.
To find out how our fully outsourced finance function can help you today, book your FREE discovery call with a member of our team.
