How to future-proof your finances in the NFP sector
NFP organisations have faced an unprecedented change in the last 18-months and, while the sector is no stranger to operating on a shoestring budget, day-to-day operations have been dramatically affected in the wake of the pandemic.
One of the largest impacts on operations has been the steep decline in volunteering numbers; a challenge which urban farm and Nottingham-based charity, Stonebridge City Farm, has felt deeply leading to a dramatic cash shortfall.
Although not unique to the farm, falling volunteering numbers have been experienced across the wider sector – so much so, according to the NCVO, 35% of organisations have noted a decrease in the number of volunteers throughout the pandemic. Further figures from the NCVO suggest the sheer importance of the volunteer workforce, with 91% of the UK’s charities solely relying on them to service their operations.
Looking ahead, the picture for charities appears more positive; demand for services is predicted to increase with 66% of organisations in the UK expecting greater demand for short-term services. Although the outlook is brighter, it won’t be short of challenges - particularly for the finance professionals helping to steer the ship.
1. Assess the impact
More than 21million volunteers help UK charities during ‘normal’ times, and the estimated value of their work each year is, on average, £23.9bn. Their work is not only fundamental to the service-users, but also the livelihood of the charities themselves, not to mention in the wider economy contributing £12.2bn to the UK economy.
To put it into ‘local’ perspective, the loss of volunteers at ‘micro charities’ like Stonebridge City Farm has hit hard. At Stonebridge, volunteers are vital to the day-to-day operations, including running the on-site café, shop, gardens and animal boarding – services that generate 25% of its annual income but, because of the pandemic, were forced to close due to workforce shortages.
Like many other charities, the Stonebridge team had to refocus its fundraising efforts on other sources of income, including grants, online donations and an appeal, to plug the shortfall. During Q1 of 2021, the National Audit Office reported that a mammoth 91% of Government grants for charities had been disbursed, indicating the demand for funds right across the sector.
2. Preparing for the future ahead
According to its website in November 2020, since the start of the pandemic the farm had lost over £75,000 of onsite income, which they had estimated to increase to over £100,000 by the end of the financial year in March 2021.
A combination of lockdowns, reduced visitor and volunteer numbers, closure of the aforementioned facilities and reduction in community outreach such as school visits had left a sizable dent in the farm’s annual income. So, like thousands of other organisations it needed to plan ahead.
Like many other charities, the team was able to increase its online donations through appeals and JustGiving pages, which not only raised awareness of its services to visitors but also future volunteers.
It was also able to access additional support, including reaching out to previous loyal funders, utilising emergency Covid funding and taking advantage of Government support streams like the furlough scheme.
Yet with more ‘stakeholders’ involved and furloughed volunteers wondering if their careers were secure down the line, having easy access to real-time financial data to keep them informed was critical to preparing for the future.
With the situation changing daily, it was imperative the team had a robust financial management system that could ensure they would be well-placed when heading into the new financial year.
3. Ensure your finances are in order
In the age of data-driven business finances, never has a good financial management system been so important. More so than ever, budget holders at organisations like Stonebridge need access to up-to-date information so they can accurately pinpoint the financial performance of the organisation.
In a fast-moving situation, being able to quickly pull through real-time data into a comprehensive report would enable teams to provide regular communications to all involved – in Stonebridge City Farm’s case, this was its funders and trustees, followers and volunteers, all of whom received fortnightly updates thanks to its monthly re-forecasting process.
Re-forecasting allowed them to create a business roadmap towards stability. In general, for any forecasting to be accurate, it’s important it is modified when significant changes occur, whether externally or internally. But doing this manually – with so many moving variables - can often take time; time that charities don’t have.
If the last 18-months have taught us anything, it’s the importance of being prepared. The ability to automate your monthly forecasting could be the difference between sinking or swimming. Not only would it save teams time compiling the lengthy reports, it would significantly increase the accuracy of the decision-making process because leaders or trustees could have instant access to a rapidly updated forecast based on the very latest information.
Like other charitable organisations, they will have begun the financial year with set KPIs to achieve – but with the disruption of the last year, knowing how current circumstances are affecting those KPIs within a matter of hours could make a great difference to the organisation’s long-term performance.
Regular forecasting like this could help charity teams remain agile; giving them the edge to compare the current data against budgets and billing levels, as well as drilling down into the detail of visitor numbers, various projects and departments, funding and income types, including tracking Stonebridge’s new online funding platforms.
Next steps
For Stonebridge City Farm, having access to instant performance insights will set them in good stead when applying for further grant funding.
It would be no surprise to read that outside investment – whether from trustees, visitors or online donors – is crucial to any charity’s donations. But before asking any pledgers to invest their hard-earned money, it’s only good business sense to be able to demonstrate how the business is currently operating and what financial position it is in. And so, being able to measure the impact of their work quickly is vital to presenting that information to interested organisations and individuals.
According to the latest data from the Covid-19 Voluntary Sector Impact Barometer, led by Nottingham Business School, 44% of charities across the UK have reported a stable financial position in the last month, with 38% reporting an increase in their range of services and 66% predicting an increase in demand over the next few months.
The outlook for the sector remains hopeful, and volunteer numbers are steadily on the rise with 20% of UK charities noting an increase in workforce. The steadfast determination of the NFP sector has been exemplified by the work at Stonebridge City Farm, and we believe it is encouraging to see micro-charities like them adopting the latest financial management systems to help guide them through their challenges and future-proof their services.
