Issue 5: Managing finances

Issue 5 focuses on financial resilience and managing finances to maximise impact.
charity finance

charity finance

Issue 5: Managing finances

Managing charity finances isn’t just about accounting and reporting. For charities, it’s also about maximising the impact of available capital, finding sustainable income sources to fund projects, and allocating funds fairly to beneficiaries and services. This issue will focus on financial resilience and managing finances to maximise impact.

What’s inside this issue:

  1. Doing more with less | Honorary Treasurers Forum
  2. 3 financial policies for every charity | RSM UK
  3. Alternative funding streams | Charities Aid Foundation

Doing more with less


We know from our members that many charities are struggling to maintain their income; Treasurers are being asked to do more with less, often without help from the rest of the Board, who “don’t do numbers”.

Cutting costs is always difficult, but it gives us the opportunity to look again at our mission and really understand where the impact of our charity is felt now. Services can grow organically and then become embedded.

Rather than trying to do the same things at reduced cost, how about involving the whole board in a realistic evaluation of how many people benefit, and remind ourselves what lies at our core?

One charity we know did this and discovered that the same few families were taking advantage of every service offered. Good for them, but not for the charity as a whole. The Treasurer was finally able to discuss the cost of delivery to individuals, and by refocussing, the Charity extended its reach and impact to a larger number of beneficiaries despite cutting some activities. It got the Treasurer out of the numbers corner, introduced impact reporting to the Trustee Board pack and, the initial intention, allowed costs to be reduced.

3 financial policies for every charity


The Charity Commission recommends that “trustees must be assured that all policies, procedures and practice are checked and challenged to ensure they’re fit for purpose.”. There’s not a definitive list of all the policies required but there are three important financial policies applying to every charity:

1. Reserves

Reserves are about keeping money aside to protect against reductions in income or to take advantage of new opportunities. A reserves policy helps explain why that money is being set aside.

As a minimum, a reserves policy should include:

  • how much your charity needs to hold in reserve and why
  • how and when your reserves can be spent
  • how often the policy will be reviewed

Ultimately, trustees need to work out how much their charity needs to keep in reserves. A balance must be struck. Too little, and you could be exposed to shifts in income. Too much, and questions could be asked about whether you are acting in the best interests of your beneficiaries. 

2. Conflicts of interest

Trustees must make decisions based only on what’s best for their charity. Any personal interests, or the interests of people or organisations connected to trustees, must not be allowed to influence a charity’s decisions.

There are two common types of conflict of interest: financial conflicts and loyalty conflicts. Financial conflicts happen when a trustee, or person or organisation connected to them, could get money or something else of value from a trustee decision (this would not include any reasonable trustee’s expenses). Loyalty conflicts happen when a trustee might not be able to make decisions that are best for the charity. There can be a conflict because the trustee’s loyalty to the other organisation or person could compete with their responsibility to the charity.

Conflicts of interest must be identified and dealt with properly. All trustees must do this, not just the trustee with the conflict otherwise, it is not meeting the joint legal responsibility to make decisions.

A conflicts of interest policy should tell trustees:

  • when conflicts of interest commonly happen
  • how to declare them
  • what all of the trustees need to do about them

3. Scheme of delegation

Trustees often delegate day to day activities and tasks to particular trustees, committees, volunteers or staff. Delegation can help trustees to govern more efficiently, but they cannot delegate their overall responsibility. Trustees always remain collectively responsible for all decisions that are made and actions that are taken with their authority.

It is a good discipline to set out in writing the limits of any delegated authority, which is known as a “Scheme of delegation”. This should include clear reporting procedures, to ensure the delegated authority is exercised properly. The delegated authorities could include financial authority limits, staff job descriptions, volunteers’ role descriptions and terms of reference for committees.

Ultimately, the trustees need to consider and agree what decisions they will not delegate, for example, high risk and unusual decisions.

Want to strengthen your charity’s finances? Consider alternative funding streams


Having strong finances is a priority for every charity, and one that is more salient than ever in the context of rising inflation and the cost of living crisis. Recent CAF research has found that as well as worrying about the increased cost of bills and supplies, nearly three in five (59%) charity leaders are concerned about people having less money to donate to their cause – and, as a result, a third of charity leaders (35%) are worried about their organisation struggling to survive.

These figures show how important it is for charities to be financially resilient, not least in order to weather crises. Here are some options for charities to increase and safeguard their income. Not every option will be suitable for every charity – funding streams are unique to charities and will not necessarily be suitable for all, however, these options could provide avenues to explore further.

1. Leverage networks

Most charities want to find new donors. Your charity might have more connections than you realise, especially if you consider the networks of your trustees. This is something CAF explored in our recent research with the ICAEW (spell out) into the opportunities and challenges inherent to trusteeship.

New donors and sources of funding could come from individuals, businesses, trusts, local authorities, and other non-profits and grant-making organisations. Try thinking creatively about whether your charity has connections that are potentially under-utilised.

2. Explore innovative ways of giving

The decline of cash is impacting charities. During the pandemic, we worked with UK Finance to encourage people to collect the loose change they had at home and donate it to charity.

However, there are also potential opportunities for charities in an increasingly cashless society. Contactless payments are rapidly increasing, now accounting for 69% of all debit card transactions. Establishing contactless payment points and QR codes enabling donations can be a highly effective way of generating income. It is worth exploring providers like GoodBox, who support the charity sector by providing charities with a range of innovative tools, including contactless donation points, to help them reach new donors.

We should recognise that some charities do not have the investment required to technologically advance in this area. However, there are some simple steps charities can take to improve their website and social media presence, which are relatively cost efficient. You can learn more about how to boost online donations on the CAF website and via CAF Donate.

3. Corporate partnerships

Many businesses are keen to find ways of partnering with charities and corporate donations can provide an invaluable revenue boost.

Charities can benefit immensely from establishing mutually beneficial charity-corporate partnerships – both in terms of profile and finances. To set up such a partnership, charities can approach potential corporate partners and sponsors with a clear pitch of how a partnership might meet both organisations’ aims, what can be achieved, what success will look like; and why that business in particular is a good match for the charity.

4. Encourage the use of Gift Aid

During the current cost-of-living crisis, it is especially important to make every effort to remind donors about the value and vital importance of Gift Aid and ticking the Gift Aid box on donations, which effectively adds 25% to every pound given. It is estimated charities lose out on more than £500-600m every year from unclaimed tax relief.

All registered charities are entitled to join the scheme. You can learn more about Gift Aid on the CAF website here.

Financial resilience is front of mind for charities in 2022. Exploring new funding streams can offer ways to exert control over finances and help create a more resilient future for organisations. CAF offers further resources regarding ways to strengthen charity finances, which you can access here.

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