We offer advice to charities to help them prepare their finances for the future
Charities have always faced uncertainty and futureproofing is a key part of risk management. Futureproofing can be defined as a series of processes that ensures that an “organisation or initiative will continue to be effective in the future if a situation changes”.
Futureproofing is more pertinent than ever. Everyone is aware of the challenges the pandemic presented to charities. And if they haven’t already done so, organisations need to start planning responsibly for the future.
Those that learn the survival lessons will be better able to build a more financially sustainable organisation – one that is more likely to withstand any future shocks, such as further pandemics, economic volatility, social unrest, or industrial action.
Technology has proved its worth during the pandemic, a period that has accelerated digital transformation. Now the challenge is to integrate technology further into the fabric of any organisation looking to be as futureproofed as possible.
While it is unlikely that many specifically had “global pandemic” listed on risk registers, being prepared for the worst is not a new issue for charities. Disaster recovery planning, and change assessment and management, are critical tools used to build contingencies for unforeseen disruptions.
COVID-19 has provided a real-time examination of charity preparedness. It has compelled organisations to consider new, or accelerate existing, methods of operation and service delivery. Some have even thrived, but there is an opportunity for all charities to be more sustainable and impactful by strengthening their financial planning.
This is not just about having a specific plan for “what we do if there is another pandemic” but using the experience of COVID-19 to look ahead and develop a strategy that maximises the chance of financial sustainability.
By learning from a period of unforeseen change, charities can show leadership to assist both recovery and the ability to pre-empt future shocks.
The starting point for futureproofing should be to understand why your organisation exists. It is only by bearing this in mind that you can maximise your chances of sustainability. If you know what you want to achieve, you’ll know where to adapt and innovate.
Ask what impact you have now and how can you improve it? Explore new ways to support beneficiaries and deliver impact and keep in mind what you are trying to achieve.
Balance short-term decisions with long-term vision. Consider what future events would affect your ability to meet your charitable objectives. Instead of trying to accurately predict the future, focus on how you make decisions for when an opportunity or challenge arises. Have a clear set of criteria for assessing risk.
An understanding of what happened in the past can help dictate your financial future. Ask yourself some questions. What lessons can your organisation learn from the pandemic, and how could this shape what you do next? What changes worked? What could you do better?
Pre-pandemic, many charity operations had hardly changed in years. With over a year of lockdown-enforced change, now is a good time to challenge future ways of working. How can you reduce overheads? Can you continue remote working to cut administration costs? Can you use technology to support the introduction or continued use of flexible working models?
Spread financial risk by diversifying income streams. However, be strategic. While securing funding is essential, don’t let it dictate your direction – and lead to mission drift.
When funding is scarce, it makes sense to collaborate, whether that be full merger or informal partnerships with other charities.
Who is responsible for horizon scanning? A focus on day-to-day survival can mean it is easy to forget to look ahead.
Digital technology has already played its part in assisting charities in responding nimbly and meeting the challenge of doing more with less. It has allowed charities to help increased numbers of beneficiaries at a time when income, particularly fundraising, has been further stretched. And it has often done this with a largely remote workforce.
Looking ahead, there are further opportunities to operate more strategically, build infrastructure, and invest in technology to maximise futureproof strength.
A vital component of futureproofing is using thorough financial planning as a key pillar of responsible governance. This should be based on ensuring that you have the information available to properly assess your current financial position, to enable robust and informed decision-making.
Accounting software that facilitates the production of real-time, accessible data will underpin a sustainable and impactful charity, which is, as far as is reasonably possible, futureproofed.
Find more charity finance resources at the Sage Non-profit Success Hub