Insights
There is plenty for charities to consider as the financial year ends
The financial year is nearing its end, leaving charities with lots to ponder as they prepare for a new financial year.
Key to preparation is to reflect on the year that is about to end and assess what went right, what went wrong, and what measures you can put in place to improve.
Planning for the next financial year should be a charity-wide task, with leaders canvassing the views of those on the frontline to gauge priorities and how the charity can best fund them.
This gathering of views can also help identify efficiency savings and ideas on how to generate more income.
Here we look at some of the best ways charities can plan for the start of the financial year.
Charities face a difficult challenge when it comes to setting long-term budgets as their funding, which is often from government and trusts, can change from year to year.
But in the short-term, over the upcoming 12 months, there should be enough information to effectively set a budget and plan.
Charities that have been operating for several years will have a good steer on their seasonal cycle of donations as well as realistic expectations of funding.
For example, most charities can expect increases in donations around their annual appeals, particularly in the run up to Christmas.
Advice from the Charity Commission around setting a budget is for charities to assess how much they currently have, how much they expect to raise and their spending plans each year.
“By checking how much your charity receives and spends against the budget, you can identify problems in good time and agree what to do about them,” says the regulator. “It’s particularly important to do this where you see big differences between the budget plans and what is actually being spent.”
Central to setting budgets is to mitigate risk of financial. Ensuring income comes from a range of sources – such as donations, investments and selling services – is vital to developing a strong financial strategy for the year ahead.
Without this diversification of funding charities leave themselves open to financial problems by relying on too few sources of income.
Sector body the Charities Aid Foundation (CAF) strongly recommends charities consider a broader range of income streams, especially as competition for grants and donations increases.
Charities should consider investing in boosting corporate partnerships, the CAF says. These have clear benefits for companies looking to beef up their corporate social responsibility credentials and invaluable to charities as a way of generating income.
Such partnerships can include staff raising money for the charity, placing donation points in their locations, as well as hosting gala or auction events, both virtually and in-person.
“Compatibility is really important,” says CAF, who adds that such partnerships can last for decades if nurtured well. Charities are urged to seek out partnerships with businesses with a connection. They could be located near to the charity’s centres, perhaps, or their chief executive may have a personal link to the charity’s cause.
COVID-19 saw charities swiftly ramp up their use of technology across their organisation, fundraising and support for beneficiaries.
This trend will continue over the coming years. Charities are advised to ensure they build a robust digital strategy into their financial planning to explore ways technology can generate further efficiency savings and new income streams.
Perhaps the year ahead could be an ideal time to overhaul content management systems, bring in new social media management tools as well as review CRM processes.
A digital strategy also gives charities a firm direction and clarity on how technology can support wider objectives.
When writing a digital strategy, organisation is vital. Charities are advised to assign roles to different team members around the use of technology and use project management tools such as Trello to make this process more efficient.
Keeping a digital strategy flexible is also important, so that it can reviewed regularly based on successes, failures, and emerging technology trends.
Keeping up to date on legislative and regulatory changes around charity finances is also important ahead of the next 12 months.
The Charity Finance Group is a useful resource for voluntary sector organisations to keep up to date with their legal responsibilities.
“Breaching rules can put funding at risk, lead to the loss of banking services and damage the reputation of the charity,” warns CFG.
An example the CFG gives of a legal change for 2022 is new regulations on how charities and other employers fund defined benefit pension schemes. These changes could mean charities have less time to deal with pension fund shortfalls and may need to increase annual contributions.
Join us on the 30th of May, where we will explain more about how VR technology works and how it can help charities, hearing from organisations where the technology has already made a difference.