What to do if your charity is facing financial difficulties?

12th October 2020

In recent months many charities have found themselves in financial difficulties and an uncertainty of long-term survival, often caused by factors out of their control. Most notably the ongoing Covid-19 outbreak, which has had several knock-on effects such as a reduction in donation income or decreased operating capacity during the tightened lockdown rules. Other external factors causing charities to face financial distress include:

 

  • the withdrawal of significant grants,
  • the wider economic climate,
  • unplanned overspending etc.

 

How to survive these difficulties?

 

It is most important that trustees are aware of risk factors and alert to changes in funding which could impact the future survival of the charity. Charities must have in place contingency plans for this reason and ensure that they are not ‘placing all their eggs in one basket’ so to speak, often the problems arise when there is only a plan A.

 

You must ensure you are monitoring your financial situation regularly and appropriately to ensure that you are able to react to arising situations. Having monthly management accounts produced, whether prepared internally or externally by an accounting professional, is an excellent way for a charity to do this. The reaction to such situations might include things such as reducing expenditure, disposing of unused/oversized property, or even searching for alternative sources of revenue. However tough these decisions can often be to make; it is better to recognise that they need to be made early on.

 

If you think you may benefit from having management accounts prepared you may wish to contact us for further guidance and advice.

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