Introduction

The Oxford English Dictionary describes the term sustainability as; ‘able to be maintained at a certain rate or level’.

For a charity, being sustainable involves a great deal of forward planning and preparation for the future. One of the core fundamentals of remaining sustainable for a charity is being able to continue operating when a core element of funding is suddenly removed or something unexpected occurs.

 

How do I know if my charity is sustainable?

There are many factors that contribute towards sustainability, these can include:

  • Diversified funding
  • Cashflow and cost control
  • Impact, strategy, and planning

 

Diversified funding

Charities that have an overreliance on one particular source of funding could find themselves vulnerable if that funding is suddenly taken away or significantly reduced. In an ideal world, charities should never have more than 20% of their income from a singular source. This is of course far easier said than done and it isn’t one-size-fits-all, some income streams will always be more robust than others and will have varying levels of control that the charity can exert over them.

If you feel that you are overly reliant on one income source then you should aim to come up with a contingency plan in case this source of funding dries up or is significantly reduced. The more control the charity has the better. The assessment can be covered as part of the risk assessment for the charity to demonstrate that the trustees have considered it. As mentioned above, some funding sources are always going to be at greater risk of being cut at short notice than others.

Cashflow and cost control

Cashflow is normally the largest cause of organisation failure, and for charities, the risks are just as high if not properly managed. You should always monitor your cashflow on a regular basis. Implementing a financial plan that is monitored and reviewed regularly will make your cashflow management a far easier task. This should be fluid so that forecasts can be updated for unforeseen eventualities.

It should go without saying that cost control is vitally important and needs to monitored regularly. If your income unexpectedly falls you will need to find a way to manage associated costs. This could mean making cost-cutting decisions in key areas in order to ensure the charity is not at risk. Always keep in mind that the trustees have a duty to ensure the charitable funds are protected and used for the right reasons.

Impact, strategy, and planning

It is always important to remember why you are part of this charity, what impact do you want it to make? It can be very easy to become distracted by finances but it is important to consider whether your charity is achieving its objectives. Without achieving a tangible impact, it is very unlikely you will be able to sustain a regular income to fund charitable activities in the long term.

In order for your charity to be successful, you will need to have a strategy in place. In your strategy, you should establish what impact you want your charity to have on the particular cause for which it was set up to help. It is just as important to focus on what you will not be doing, as this gives your charity a focus so your team does not get distracted. Don’t fall into the trap of spreading the charity too thin and always ensure the primary purpose objectives of the charity.

Once you have identified your impact and strategy you can look to create a business plan. The plan should set out how you will implement the strategy. Once again this is a fluid document and should be revisited by trustees and the executive team regularly.

Conclusion

Ensuring you are running a sustainable charity depends on many factors, of which we have only covered a handful in this article. The importance of frequent communication between the executive team and trustees cannot be overstated. Having a clear picture of where the charity is heading and how it will aim to get there whilst planning for unforeseen circumstances will help ensure sustainability and relevance in the long term.

Free initial consultation

Simon Bladen Partner

Simon Bladen

Partner, Sheffield

0114 266 7141

[email protected]

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