How smaller charities can adapt to the changing funding landscape

The combined effect of public sector cuts and access to traditional funding pots becoming more difficult means that charities are having to take a much shorter-term view of their funding plans.

Smaller charities can no longer rely on local authority and longer-term funding from central government, trusts or foundations in order to survive. Third sector organisations are weathering the storm by adapting their staffing structures and taking a shorter term view of their objectives.

Here is a two-pronged approach charities can take in order to adapt to the changing funding landscape:

Take a project-by-project view

The first part of the approach includes charities scrutinising their cost-base and investing in resource on a project-by-project basis. Small charities now have to keep a closer eye on costs and hire staff on shorter fixed-term contracts to complete and fulfil the objectives of a project for which they are funded. The charity can then take a view on whether the same level of resource is required before moving forward with any new initiative.

Due to the tighter margins and squeeze on funding, charities need to ensure they achieve a sufficient return on investment for every project. This can be ensured by setting clear Key Performance Indicators (KPIs) for staff, which must be part of a wider overall plan. If a charity is able to demonstrate the social impact of a project, this can help the organisation to secure future funding and provide the opportunity to reward temporary staff. However, the key is to ensure charities remain flexible and results must be monitored on an ongoing basis. If something isn’t working, then they must adapt and change the plan accordingly to make certain the goals of the project are achieved.

Pursue alternative revenue streams

The second step of the strategy focuses on diversifying revenue streams.

A recent example of how charities might pursue an alternative revenue stream is through the plastic bag levy which is currently in place across England and Wales. Several of the UK’s biggest supermarkets have recently ring fenced a proportion of monies gained from the charges which will go towards ‘good causes’.

Some smaller charities could be in line for cash windfall from the plastic bag tax, but the gains are likely to be short-lived and don’t represent a reliable funding stream.

Although charities cannot rely on this type of funding in the medium to long term, this is a perfect example of how smaller charities, which often lose out to larger organisations when competing for funding, can move quickly to take advantage of opportunities.

Some retailers have said they will allocate funds on a store-by-store basis and we would urge charities to ensure their financial plans and reporting are up-to date before an application is made. In order to take advantage, charities need to stand out from the crowd and tangibly show how they would use any money to achieve a specific social objective. The more innovative or creative the ideas, the more chance the charity is likely to capture the eye of the retailer and secure vital funding for a new or up-and-coming project.

In terms of the overall two-pronged attack, an arts organisation that we work with in the Midlands is reaping the benefits of this approach currently. By structuring their cost-base so it is adaptable to change, they are achieving great results while streamlining costs at the same time. For example, the charity was able to double in size over a three year period after completing a number of successful educational and social inclusion projects. This success is also allowing the charity to attract and pursue new alternative revenue streams helping further to safeguard its future. This organisation’s approach to the shifting funding landscape should be an example for others.

Simon Atkins, is partner and charities specialist at accountancy firm Clement Keys