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Disclaimer
This article is written by Nigel Cohen, one of the founders of Pure Charity. It represents his personal views and does not reflect the views of Pure Charity, the Gil Poulos Memorial Trust or any of the organisations or Patrons that help provide the facility.
Contents
Below are sections on:
The credit crunch for charities
The banking crisis is affecting banks' confidence. The result is they have less money to lend and are willing to less to dramatically fewer people and businesses. As more businesses fail to get the funds they need to operate, they will have to cut down on their operations, by cutting what they buy and on who they employ. It is close to inevitable that unemployment will rise.
The likely consequences
A small number of charities will be largely unaffected by the charity crunch. But for everyone else, companies, individuals and the government (both local and national) will have less money to spend. Which means charities will have to raise funds from a much smaller pot of available funds.
Dealing explicitly with government funding, it is clear that the level of spending required of government during this credit crisis dwarfs the predicament of overspending that existing prior to the credit crunch. Charities that rely on government funding should have very firm plans to deal with reduction in the level of government funding.
For those charities who think they do not receive government funding, be aware that the amount of Gift Aid repaid by the Inland Revenue is the amount that the government will be including in their calculations of income and expenditure when the day of balanced budget reckoning arrives.
The simple message for charities is clear - funds will be more difficult to come by.
Lessons from history
There is little doubt this crisis is much deeper rooted than the 1989 downturn. In my view, the banks then were no less culpable than now for the crisis, for having thrust borrowing down the throats of their customers and, in many cases, refusing to do business unless borrowers also took out expensive and unnecessary insurance products.
In the 1989 downturn, I spoke with a number of directors of the large public companies who were certain a downturn was coming. It took between one and two years (1991) before small companies and individuals felt the impact. It then took about three years before the banks to start blaming customers for having irresponsibly taken out loans they could not afford (1995). It took another three years before the banks started thrusting loans in front of customers again (1998).
The lessons for today are:
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small companies and individuals have a number of months yet before they feel the full impact of the crunch
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charities should not rely on current donation levels to forecast donations in one year from now.
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any planning for a downturn in donations should accommodate a minimum period of 2 - 5 years from now.
Handling the downturn
It can never be certain that donations will drop. But it would be most imprudent to fail to have plans in place to cope with a downturn. Below are a number of thoughts to help charities handle the likely landscape for the next few years.
Increase your donor base: Try to increase the number of people and organisations who donate to the charity
Increase your fund-raiser base: Try to increase the number of people and organisations who help you raise funds
Cut costs: Cost cutting is the bastion of survival. Organisations typically evaluate costs by reference to their existing services and conclude they can not cut costs. Typically, one or two years later, costs have been cut. The quicker you can overcome the psychological barrier to cost cutting, the quicker you can bring your cost base down to the level of donations. Start the planning now so that you are ready to act more quickly if you need to do so.
Switch donations to standing orders: Donors are going to be feeling poor, but most will not want to stop supporting you if they have the choice. Some charities do not already provide for donors to pay by standing order. For donors who are struggling to repeat the level of previous one-off donations, suggest a smaller, monthly payment by standing order.
Widen your net of fund-raising activities: Consider widening the type of fund-raising activities you carry out. Successful ideas for fund-raising include specific (rather than general) appeals, sponsorship events (such as sponsored walks), fund-raiser events (such as dinner/dances), auction of goods or services, selling advertising space (such as in a brochure or program), selling goods or services (such as a charity photo collection, callendar, teddy bears or charity services). Look for more innovative ways of fund-raising, such as Facebook, school or university visits, car boot sales. The more people you involve in the problem, the more likely you are to find solutions.
Keep in regular touch with donors: When people struggle with their finances, paying bills tends to be a firefighting exercise. If you keep in regular touch with past or potential donors, you stay at the front of their minds. The more you can motivate people to support your activities, the more donations you will attract. Of course, it is important not to over-communicate. Monthly or quarterly emails tend to work best. Charities who want to set up or improve their facilities to keep in regular touch with existing and prospective donors by email are welcome to get in touch with Pure Charity on 01628 660665 to see if we can set you up with free facilities.
Collaborate with other charities: Find other charities with whom you can share costs, or join forces with similar charities to avoid duplication of services provided.
Requesting developments
Pure Charity is very happy to consider any request to develop additional facilities that might help charities during these very difficult times. If you want to discuss any services that do not exist but which might help you to raise considerably more funds, reduce costs or share resources with other charities, call us on 01628 660665.
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