“Charity begins at home, but should not end there” – Thomas Fuller, 17th century clergyman
According to the Charities Aid Foundation’s (CAF) latest report, ‘Individual donations fell by 5 per cent from £10.1bn to £9.6bn in 2015’. While last August, a Lloyds Bank Foundation survey concluded: “Eighty-one per cent of small and medium charities are ‘struggling’ to survive and a further 63 per cent are ‘seriously worried’ about ongoing income.”
The CAF also reported in April this year: “The reality is that any organisation needs to spend money on running its operations. This means that a charity really does need a head office to control the organisation, as well as ensuring compliance with laws and regulations. The myth that charities can operate with zero overheads is utterly misleading and creates the illusion in the public’s mind – and it damages the rest of the charity sector.”
That need for cost control is why Auditel has been increasingly in demand in the non-profit sector.
Chris Allison, managing director of the cost management franchise, said of the latter report: “We do agree! However, following a survey with UK business leaders through Management Today, we discovered that a lack of understanding is the biggest obstacle to strategic cost management in their organisations. Many head offices simply do not have the right people, tools, knowledge and processes in place to deliver a fully-fledged cost management programme, yet 73% still undertake this vital aspect in-house.
“Even so, a growing number of charities are seeking help from us to work with their finance teams to deliver solutions and free up badly-needed working capital.”
Eight Top Tips for managing costs in the Charity sector:
Chris Allison put together the following advice for charities looking to maximise their operational efficiencies:
Charities and the third sector are heavy users of stationery and big savings can be quickly identified.
A big issue for the sector. With the increase in money laundering, organisations need help with the transfer of funds. There are more effective ways to transfer money.
Office Equipment & IT
The sector often suffers from outdated office equipment and IT. Investment in new equipment can provide a good return through increased efficiencies and productivity.
Multi-site Retail Outlets
Multi-site charity retail outlets can benefit from consolidated accounts rather than individual accounts; electricity is a good example.
Efficiencies vs Redundancies
Reducing the size of the workforce should be the last resort. The first course of action should always be to look under the bonnet of an organisation to see where costs can be lowered and efficiencies made.
Essential business services are costing charities in the UK hundreds of millions annually and with this figure increasing every year.
Utilities & Energy
Premises-related costs, fixed and mobile communications, IT, utilities and finance such as insurance and banking charges are just a selection of essential overheads. It is not uncommon to identify typical savings in the region of 20% for utilities and energy.
An ongoing activity
The key to maintaining best value purchasing and supplier management is to be consistent. It’s not just a one-off exercise and should be considered as an ongoing cost management to realise maximum benefits.
Allison also offered a recent case study that highlights what’s possible:
Target Housing is a South Yorkshire-based charity with over 100 properties, which has been providing accommodation and support to homeless and vulnerable people for over 21 years.
Shaun Needham, its chief executive, says: “We rely heavily on local and national government funding, but in the current economic climate and national cuts, those funds have been reduced dramatically. They are hitting us very hard and we need to take every opportunity to save money.”
That’s why he engaged Auditel, which has so far delivered savings of over £70,000, across gas, electricity and telecommunications.
Shaun continues: “The savings that Auditel have made for us not only mean that our operating expenses are lower but that we can redistribute the money to subsidise other areas and improve the services we provide.”