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3 checks for Financial Sustainability

By 7th November 2012No Comments

<br /> Steve Ray

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Steve Ray

Last night I attended a seminar entitled “How confident are you that your Charity is financially sustainable?” organised by the Charity Finance Group and hosted at Cass’s Centre for Charity Effectiveness.

There were a variety of speakers there with a wealth of experience and from diverse backgrounds, all with excellent advice.

For me, there were three points that seemed to recur which appear below in bite size

1.Risk – be aware of your exposure to risk; whether it be one major contract that requires huge resource but will be subject to review or whether you have projects that are struggling, you need to take a cool look to see what actions are necessary to mitigate the risk.

2. Denial – hope and optimism of the next large contract or tranche of funding are not the same as real assets that can be utilised. If the money is not ‘in the bank’ then you don’t have it and need to plan accordingly. Options include increasing your income (fundraising, sales, diversification), looking in detail at how you can manage expenditure (structured and strategic) and in rare circumstances winding up activity in some areas. Cutting staff should be a very carefully considered exercise – while you may save money in salaries in the long term, in the immediate short term you may have cash flow issues with severance packages and you will also be facing a loss of resource as well as adversely affecting morale.

3. Act sooner rather than later – increasing your income, diversification and cost management all have lead times and can be lengthy exercises. By looking ahead and acting proactively you can increase the time and opportunity you have to get to the position where you need to be.

Although this event was aimed at Charities as part of “Trustees Week”, these are points that are easily transferable to a commercial setting. Any business, enterprise or organisation who is proactively looking at their financial sustainability (hopefully all of them!) should be looking at risk, the reserves they hold to offset that risk and the measures they are taking to increase income and reduce expenditure.

If you are looking at how best to manage your expenditure, we’d be delighted to help.