Charities: Navigating the cash flow crisis

In this article, PM+M partner and charity sector specialist, Helen Clayton, takes a look at some of the key steps charities should take to keep cash flow moving and ensure their organisations can continue to provide much valued support through the challenging economic climate brought on by coronavirus.

 

There is no doubt that the charity and not for profit sector will be hit hard during these unprecedented times and some may not survive. Indeed, some will also thrive. Just as with the wider business world, how an organisation meanders its way through will depend on several factors.

Cash will always be king

Conservation of cash will be critical. However, this doesn’t necessarily mean that a charity should be seeking multiple forms of borrowing to survive in the short term. Borrowings mean, ultimately, repayment with interest and the effects of borrowing could be seen for the medium to long term. As such, future strategic decisions and the ability to take advantage of opportunities, could well be hampered.

Seeking funding via debt should therefore not be taken as a first option.

In my opinion, researching and exploring all other options first will create more of a chance of a sustainable future for any charitable organisation.

Looking ahead

In considering the options available, it’s critical to understand how cash levels will change over the coming weeks and months. Forecasting should be a significant part of the finance and senior management role in order to demonstrate the sustainability of the organisation, to identify where cash will be low or non-existent and how those tough times might be alleviated.

I would recommend that the forecasting is on, at least, a weekly basis. There will likely be peaks in outgoings and understanding the cycle of this and the impact will underpin any decisions that you may take around deferral of payments, for example to suppliers, seeking support from HM Revenue & Customs or furloughing.

The forecast should be a live document that is updated on a regular basis and that is compared to the actual cash flows that do take place. By comparing the actuals, it will give credibility to the forecasting and provide some detailed insight.

As we are not expecting to come out of lockdown completely for some time, there may be planned events that are now not going to take place, which would generate funds for the organisation. They may be run slightly differently but there will probably be some financial impact. By keeping this cash flow forecast running into the future, it can take account of such events not taking place and enable the impact to be seen and considered earlier.

Restricted funds

As we are in such uncertain times, do not underestimate the potential that discussions with funders could have on your organisation.

Whilst funds previously received may have been for a specific purpose, the funder may now be amenable to you using those funds for other purposes, especially where there are risks of the organisation not surviving.

Get in touch

There are several options available to support funding and to defer payment of liabilities. For further information on these, I encourage you to browse the blogs on our coronavirus support hub (accessed here) to explore the options available to you.

If you would like to discuss any of these recommendations or funding options, please contact me on 0161 641 8684 or via email using the button below.

We wish you every success in achieving sustainability in your organisation.

 

This information is correct as of 14 May 2020. This blog is for general guidance only. Recipients should not act upon any of the information provided without seeking specific professional advice tailored to your circumstances, requirements or needs. Please contact PM+M before making any decisions based on any matters relating to this blog.

For more information about anything in the above article, please get in touch using the button below.
Helen Clayton
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