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This toolkit provides a checklist of charity cash management techniques to support charities in managing a crisis and buy time to implement a recovery plan. Build on this by assessing your charity finances online in 30 mins with access to the huge resource base. And to find funding, use Funding Finder, to find a huge range of grants and Help Finder to find companies that make financial donations.
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Any charity needs a minimum level of cash to keep operating. If you fall below this, you will become insolvent, even if you have a viable recovery plan. To ensure your charity does not, here is a simple cash management process to use in a crisis:
| · A credible recovery plan. Funders may not provide funding, unless they can be reasonably sure that you will be sustainable. Use the toolkits above to:
o Assess your financial situation to reassure funders that you are managing this and; o Create your fundraising recovery plan. · An understanding of how much cash you need each month, taking into account spikes within each month, such as rent and staff payroll. · A forecast of how long you will be able to fund your charity, based on current cash and expected costs and income. The forecasting toolkit will help you to do that. · An action to plan that will ensure you always have a reasonable expectation of having adequate cash to pay your bills, as these fall due. |
Increasing fundraising income is an obvious step but takes time, so here are a range of ways to use financial management to increase your cash income quickly.
| Submitting new fundraising bids is uncertain and it takes time to bring in funding. Creating new income streams, usually involves investment, takes time and has a degree of risk. You need to have a recovery plan in place, but new funding is unlikely to be a quick fix.
Approaching those who already fund you and are both engaged in your work and have confidence in you, is likely to be the quickest and, probably, best method. |
| · Tax Reliefs - each year we fail to claim £600m in Gift Aid and that's only one tax relief. There are different types of Gift Aid, lots of other charitable tax reliefs and you can claim up to 4 years retrospectively. That makes it complex, but that's £ billions in core funding we just need to claim.
· Select 'Tax Reliefs' in the Query system and the CEF will generate a report that’ll identify any you should be claiming, with links to the guidance you need to claim everything you’re entitled to. If you’ve not joined us yet, register now. Everything’s free, but if you really don’t want to, click either link above to find out what’s available and how to claim it. |
Income Invoices – some organisations, particularly the public sector, don’t pay invoices within 28 days and you definitely won’t get paid until you send an invoice. Ensure that:
Debt (Invoice) Factoring – I’m not a fan, but it might be an alternative, if you can’t get a bank overdraft. When you raise an invoice, a Debt Factoring provider will chase payment on your behalf. You’ll be given the majority of the invoice value, from the point of raising the invoice. It can help cash flow, but comes at a price.
| Deposit/Savings Accounts - any near cash assets that could be converted to cash, such as deposit accounts. Some deposit accounts require a notice period, or may have withdrawal penalties. |
| Equities - in light of the market falls, don't liquidate any equities unless you absolutely have to. That could be a potentially very expensive, as it would crystallise the loss. |
| Overdraft - talk to your bank about the scope for an overdraft. |
| Loans - consider what options there might be to take out a short-term loan. |
We have more control over expenditure and can often reduce this more quickly than we can increase income. Here are some potential ways to do that.
| Make Savings – Toolkit 6: how to save money without cost cutting identifies 20+ areas in which it is possible to make savings, without damaging your work.
Don't spend money, if you don't have to. The CEF contains links to 200+ organisations that provide charities with free goods and services. Everything from consultancy, legal, HR and property advice to software, free websites, design services, food and furniture. It identifies relevant ones for you, in the Help area of each assessment statement, as you score questionnaires. You can find some on the Free Goods & Services page. |
| Paying Bills – the standard payment period for bills is 28 days.
· If you’re paying these more quickly, set up a simple diary system and pay invoices when you have to, not when you receive these. · Some suppliers demand payment in 14, or even 7 days, but you can be sure they don’t pay their bills that quickly. Unless you absolutely have to, advise them you will pay in 28 days, or find yourself a new supplier. The exception to this is sole traders/freelancers for whom you invoice may be next week’s shopping. If you are temporarily unable to pay invoices, talk to your suppliers and try to negotiate a ‘payment holiday’. |
| Large Annual Bills
If you pay bills annually or quarterly, such as insurance, and any are due soon, consider switching to monthly payments. |
| Staff Costs
· If you’re considering redundancy, be aware of the consultation requirements, that there will be redundancy costs and the impact this will have on both delivery and morale. · An alternative is salary reductions, but rather than invite (usually senior) staff to consider this, it’d be better for them to think about donating a portion of their salary, as you can at least claim Gift Aid on this. If there are staff who would value more time off and can afford to do so, temporary part-time working, unpaid leave and/or sabbaticals may be on option to explore. |
| Defined Benefit Pension Schemes – the Pensions Regulator has said that suspending pension contributions might be appropriate in some circumstances, but should be for no longer than an initial 3 months. |
| Salaries – staff may be willing to defer part of their salaries; usually the senior team. Be aware that, if they do and the charity becomes insolvent, they are unlikely to be paid much of what they are entitled to. |
| Loans – you could speak to your lender about delaying the capital repayments on any existing loans, such as a mortgage. |
Here are some other points you may wish to consider.
| I always believe that being honest with people is best, but be mindful around the impact of language. Discussing worst case scenarios, cost reduction, contingency planning and solvency tests can really scare people, particularly if they only have partial information and take it out of context. |
| Keep the messages, honest, in context and understandable for everyone. And care for yourself. Here's a CEF resource with 12 ideas to help you maintain your resilience. |
| · But Be Positive. We have fantastic people - you're one of them. Don't sell yourself short. |
| If you do not have a reasonable expectation of being able to pay your bills, as these fall due, you must advise the Board immediately. Consider seeking professional advice.
· Warning Indicators - to think about: income streams are uncertain, limited cash at bank and few assets that can easily be liquidated, heavy dependence on a single income stream that may be at risk, multi-year funding due to end soon, with no replacement funding yet in place, spending restricted income on core costs or unplanned spending of reserves, free reserves well below target, or no free reserves. · The Risks - In law, there are potentially serious personal risks to charity trustees who continue to 'wrongfully trade', whilst insolvent. |
| · Be mindful of the charity's obligations in respect of serious incident reporting to the Charity Commission, or OSCR or CCNI, if appropriate. |
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Quick, simple and very effective.
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To access help and resources on anything to do with running a charity, including funding, click the AI Bunny icon in the bottom right of your screen and ask it short questions, including key words. Register, then login and the in-system AI Bunny is able to write funding bids and download 40+ charity policy templates as well.
This charity cash management article is for general interest only and does not constitute professional legal or financial advice. I'm neither a lawyer, nor an accountant, so not able to provide this, and I cannot write guidance that covers every charity or eventuality. I have included links to relevant regulatory guidance, which you must check to ensure that whatever you create reflects correctly your charity’s needs and your obligations. In using this resource, you accept that I have no responsibility whatsoever from any harm, loss or other detriment that may arise from your use of my work. If you need professional advice, you must seek this from someone else. To do so, register, then login and use the Help Finder directory to find pro bono support. Everything is free.
