Small Charities Bulletin April 2016

Welcome to the Small Charities Finance Bulletin for April 2016

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Welcome to CFG’s Small Charities Finance Bulletin

Charity Finance Group (CFG) is building a robust small charities programme that aims to support and strengthen best financial practice amongst small charities in England and Wales. 

This Bulletin is a useful tool that is sent out regularly to small charities and financial infrastructure organisations to highlight what is best financial practise and sign posts to good and practical resources.

Please do pass this bulletin onto others (it is FREE) who work and or volunteer in small charities to sign up please click on the following link: sign me up for the free bulletin.

To find out more about CFG’s Small Charities Programme: Resources for small charities

We are keen to hear your thoughts on this bulletin, suggestions of topics that could be covered, share useful easy to use resources and to share opinions on format or frequency. Please email us on with any feedback. Thanks

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Financial Sustainability?

Caron Bradshaw CEO Charity Finance Group
I recently ran a workshop for the Centre for Social Justice. I was struck by the number of attendees at my session on juggling finance and strategy who signed up because they were struggling to keep pace with the changes in their funding environment. One delegate for example had made impressive strides; increasing the charity's earned income by over 50% over an incredibly short period. Yet this effort had simply replaced the reductions in other funding. There was a palpable weariness in those running flat out just to stand still and a sense that some felt like they were running out of ideas.

I am usually such an optimist. Whilst I left that session energised by the sheer determination and willingness to keep searching for a way to serve beneficiaries the undertone of fatigue is concerning. There are so many challenges. Funding continues to be squeezed. Those who regulate and legislate us seem to be focused almost entirely on preventing abuse, clamping down hard and eradicating poor practice.

I am the first to say that we should not tolerate malpractice. I am part of a number of initiatives to root out fraud, economic and terrorist abuse. But  if we don't respond carefully to the challenges we currently face, there is a significant risk of damage to the sector we love and our work will be undermined; particularly for the small and micro charities that make up the majority of our sector.

The findings of the Financial Sustainability Review, a piece of work undertaken by a number of sector bodies including CFG, back me up. Government grants are at an all-time low. The sector's funding has stagnated over the last five years and we have seen a significant redistribution of the sector's spending power from the bottom towards the top. Smaller charities are feeling the pinch - they are facing a capacity crunch that limits their ability to adapt and sometimes even prohibits them from engaging in the sustainability programmes designed to assist them.

How can we address these challenges? The starting point has to be the recognition that high-quality charity services are not free: efficient, well-run organisations come at a price. At the same time, not every charity can simply earn their way out of their financial challenges: not everything we do can be sold, and bidding for contracts is not feasible for all charities - especially smaller organisations.

If the sector is to effectively deliver change in the near future, all parts of the sector, government and funders need to recognise the strains on our sector and look for sustainable solutions.

For example, government needs to work with the sector to ensure that appropriate funding mechanisms, including grants, are used by commissioners. The scale and pace of current spending cuts should be revised against long-term demands on voluntary services. Charitable foundations and other voluntary sector funders need to consider how they can adjust their funding priorities in a way that can attempt to compensate for the loss of government income and ensure a more sustainable financial future for the sector.

We all want a financially healthy sector, with charities being able to plan for the long-term. It’s crucial that we keep in high spirits, and work together as a sector, to try and achieve this.

Resources on Financial Sustainability

To find out more please have a look at CFG and NCVO's report: A Financial Sustainability Review

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Cash flows – why bother

John O'Brien, Chief Executive of C A Plus
We all know of charities that have collapsed. They don’t always hit the headlines, or end up on Panorama, but the reasons are usually familiar and not rocket science. If you spend more than you have, it usually ends in tears. It’s also particularly nasty if you spend it before you receive it.
Using tomorrow’s grant to pay yesterday’s salaries…etc.

Before you cry out, I do plan ahead, I do budget, I do keep the accounts right up to date and I don’t spend what I don’t have.  Our income and expenditure is pretty steady. Our cash reserves are sufficient for our needs (about 4 months’ worth) and not so great that I can spend time playing around with investments to earn more interest. We also have the good fortune not to rely too heavily on grants. So, like cleaning behind my ears when I was a kid … if I don’t need to….
But not all charities are so fortunate. Recently I met with the trustees of charity that has just about avoided hitting the wall. Their accounts are complex and their funding mix even worse; all sorts of grants and contracts with different end dates, conditions, reporting requirements, etc.  And don’t get me started on the ‘is it vatable’ debate!

In recent times, although the trustees did receive reports, they were just too complex. They couldn’t see clearly enough what lay ahead. What they needed was a rolling 12 month cash flow.  But not just the traditional cash in / cash out projection. They needed one which showed the flows in and out for each project, clearly showing the impact of the various end dates. 

Resources on cash flows

John O'Brien, Chief Executive of CA Plus
So we built a simple template.  It won’t get them new projects, but it does give them plenty of time. If this sounds like you, it is free to download:  
CAplus - Cash flow project based template

Case study

John O'Brien, Chief Executive of CA Plus
One of the small charities that C A Plus works with is using the cash flow template, the manager took it to the board meeting and the organisation has arranged to keep it updated monthly. The manager used it, plus other information from the trustees; to build a case that Nottingham City Council needed to support them financially for a longer period as the income from the school had been reduced and delayed. It was good evidence that there outgoings were going to exceed their incomings in the near future. It has also helped them to identify where they can cut costs, for example with the cleaning contract and in paying external class tutors, both of which could be covered by their own staff. 

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Top tips for developing your leadership skills

Kate Sayer, Partner at Sayer Vincent, highlights some of the most effective ways finance professionals can lead, rather than just manage, a team.

Firstly, listen to the finance person. Find out what is happening first, so you can work on the basics and make sure that the day-to-day financial things are going well. Then work with them to identify where change is needed and to prioritise.

Ask the finance person to complete timesheets for a month or two. This insight will help you to prioritise the areas for change.

Get ‘buy-in’ from others in the organisation. Start treating them as an internal customer – ask them for feedback on the finance service. This can serve as powerful evidence that change is needed.

Ask others if a member of the finance team can attend a team meeting to understand more about their activities and plans. In order to contribute effectively to the wider business, you have to understand it.

Change the balance of your work – you will need to stop doing some of the current tasks. For example, if there are many errors in coding invoices from a particular department, could you run a short workshop session for that team to explain the coding and they could take over that work.

Find some quick wins. It will help to persuade people that you do mean business. Pick some relatively easy things that others will notice and benefit from.

Use your research and feedback to produce a development plan for the finance team. Work with them as a team to create targets and actions. Having a clear vision of how you want to work as a team will help everyone to see how they fit in. Communicate the plan to the rest of the organisation. This will flag to others that you are changing, but it also makes it harder for the team to slip back into old ways. 
Consider the use of a charter to agree how you will work with others. This is not a service level agreement, but does encapsulate the finance team’s commitment to providing a service to others with a few words about what they need from others to enable them to do that.

Back by popular demand, Cass CCE, CFG and Sayer Vincent are running the Inspiring Financial Leadership course between October 2015 and July 2016. For more information, please click on the following link:  Inspiring Financial Leadership

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May 11th CFGs London Members Meeting Open for Small Charities

This is CFG’s member' meeting specifically put together with smaller charities in mind (FREE TO BOOK), it will give you top tips and practical tools in strategic financial leadership, employment status - what you need to know and be looking for, budgeting and reporting for projects especially when bidding for funding. For more information and to book please click on the following link:  May 11th CFGs  London Members Meeting Specifically with Small Charities in Mind

Training update

CFG regularly run training courses, seminars and conferences to develop the skills and financial leadership of charities. CFG is now piloting a programme that will offer training particularly focusing on the needs of small charities that is affordable and easily accessible.  The training will focus on particular useful financial areas that CFG gets asked about the most and will come with easy to find free downloadable resources.   You will be able to book the training from the beginning of September 2016 through a new small charities programme website.  Please keep your eye on these bulletins to find out more. 

Foundation Charity Finance - London 
Tuesday, 19 Apr 2016, 09:00 - 16:45
This course will provide an induction to the key aspects of charity accounting and reporting. Topics covered include accounting under the SORP, tax and VAT, audits and fraud and annual reports

Foundation Charity Finance - Manchester 
Wednesday, 27 Apr 2016, 09:30 - 16:00
A popular induction course covering accounting under the SORP, charity tax and VAT regimes, annual reports and financial reporting  

Annual Conference 2016
Thursday, 26 May 2016, 08:15 - 17:00
CFG is delighted to announce our Annual Conference 2016! The conference is a fantastic opportunity for finance professionals working in the charity sector to hear from inspirational speakers, gain practical advice, and keep in touch with the latest sector updates. Booking is now open and there are special rates for small charities

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Online relevant finance resources for small charities

CFG is also looking for good relevant resources than can be freely shared via the small charities programme website, if you have used a particularly useful resource please do share it with us so that CFG can make this available to even more small charities please email: Small Charities Programme

Other useful resources

CAplus - Cash flow project based template
WYCAS – Cash book and year-end report
WYCAS – Budget template

Please note that where we link to other organisations' resources, CFG is not responsible for the accuracy or otherwise of the content.

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