Can Charities Survive the Burden of the Cost-of-Living Crisis?

Expert Outlines Five Ways for Charities to Make Donors Money Go Further

CHARITIES will continue to face huge funding challenges next year due to the ongoing cost of living crisis, a leading expert has predicted.

Shameet Thakkar, the managing director of Unimed Procurement Services, said many charities could ultimately close due to growing financial pressures.

He said: “There is no doubt that charities, and smaller charities in particular, have been affected by the ongoing cost-of-living crisis. In 2022, 86% of charity leaders expressed concern regarding the impact of the crisis on those who depend on their services.

“And with 53% of donors having found it more difficult to give to charities in 2022, these concerns are justified, with charities experiencing both a decrease in income and a higher demand for services.

Outlining how the past year has been so far he continued: “2023 has seen those challenges continue, with a new Charities Aid Foundation (CAF) survey showing that the cost-of-living crisis has had an impact on the workforce of seven in 10 charities, and only 55% of charities surveyed were confident they could meet current overheads.

“What’s more, research indicates that the 2023 Spring Budget departmental budget increases have not flowed down to charity frontline services, ultimately creating a £1 billion public funding cut that could result in widespread charity closures.

“It’s clear that small and medium sized charities will ultimately have to do more with less in the current climate. But this isn’t an impossible feat, albeit a particularly difficult one.

“As a consequence of the cost-of-living crisis, charities need to make their funds go further. However, this should be something that is always kept at the forefront – everyone holds charities accountable for how their money is spent, which is an added layer of complexity in an already challenging situation. But there are specific ways charities can ensure their funds are used as effectively as possible.”

Here, Shameet outlines five ways charities can make their money go further:

Gaining and retaining donors’ trust

“Showing accountability and a transparent approach when handling taxpayers’ money is the best way to gain their trust. In turn, this can help charities receive continued donations from habitual donors, even in spite of the cost-of-living crisis.

“In this context, it’s also vital that charities don’t compromise on the quality of the commodity or the service itself. Cutting costs shouldn’t affect the quality of what the charity is providing or facilitating, which in most cases is something of vital importance to those receiving it.

“If charities are to retain consumers’ trust, keeping quality in mind is a necessity, as it will also improve the credibility of the organisation. Consumers tend to trust and respect charities that continue to support those that depend on them as best as they can in spite of the challenges – and communicating this to donors with transparency can go a long way.”

Employing the very best people

“Many are unaware of the costs that take to simply keep a charity alive, and the costs that ensue from hiring people run those all-important operations.

“Though only a small portion of taxpayers’ money goes into the charity’s running costs, such as its employees, charities have to invest in the best people to get the most value out of their funds.

“People are at the heart of businesses’ and organisations’ success, and charities are no different. Even one individual can make all the difference. Ultimately, charities should be run by business-minded individuals, allowing charities to more easily turn a profit for the security and welfare of the cause or the communities supported by the charity.”

Ensuring effective planning strategies are in place

“It can be helpful to look at a charity as a business, which means that within their planning strategies, they should focus on costs, procurement, and the value of what they’re buying to make sure that they are getting the right product for the right price.

“Often, charities will need to buy products in an ad hoc way. However, if they plan their procurement cycles correctly, properly plan for when their projects are going to come in, and know exactly what they’re going to be buying and when, then they will likely be able to obtain better value for them.

“The element of foresight and proper planning should never be cast aside, particularly at times when funds are limited – charities simply can’t afford to rely on guesswork.”

Adopting a business mentality

“Again, having a business mentality when running a charity has its benefits.

“Many think that charity leaders are paid too much. But if we think of them as business leaders, they should receive the money that they need to be at the helm of their organisation, which involves many of the same elements of business leadership: hiring quality employees, putting the right processes and systems in place, managing finances effectively, setting goals, measuring performance and much more.

“Overall, charities need the very best people to operate effectively whether in times of crisis or not, just like a business would. But for charities, it’s even more essential that there are people guiding it that are truly capable of delivering the very best work.”

Outsourcing procurement to ensure better control

“Procurement is a large part of charities’ activities. Having professionals at one’s disposal who can effectively take care of this function can be a huge help, especially when it comes to saving on costs.

“Instead of having a full-time employee dedicated to procurement, which of course comes with its additional financial burden, outsourcing procurement allows charities to only pay for these services when they are needed.

“Smaller charities in particular don’t need procurement individuals, as they can outsource to organisations such as Unimed, paying a one-time fee as opposed to a yearly salary, which works in their favour when it comes to the costs.

“And the benefits are not just financial. Funds can often be misused if they’re not controlled by procurement professionals. By outsourcing this function, charities are also outsourcing that responsibility – but they are outsourcing to experts who know exactly how to handle this burden.”