Charities and third-sector organisations should prioritise cost savings and financial preparedness now to survive cuts in the year ahead, says Michael Hodgetts
The pandemic has been a difficult time for charity organisations, with many struggling to raise the funds needed to continue vital work for the communities they serve. Good procurement practice can help make the most of those limited funds.
I have no doubt the next 12 months will see many charities close, as local government funding will be reduced or even cut completely in the struggle to meet other objectives, which could leave the sector behind.
There are currently around 166,000 charities in the UK, with an annual turnover of just under £75bn. And while an estimated £20bn is spent on goods and services, professional purchasing expertise operates in fewer than 100 organisations.
Over the next 12 months, costs are predicted to rise, with electricity, gas, fuel and food of particular concern. So how can charities assuage these fears?
1. Review costs
Make reviewing operational costs a number-one priority and, where possible, collaborate with other charities. Often this is done by organisations that provide similar services, but why? Goods such as electricity, gas, food, stationery and telecoms are common to all. By combining purchasing power and offering suppliers an increased order value, costs can be significantly reduced. Charities need to focus on business – while the charitable aims are clear, sometimes business management takes second place. Unlike fundraising, managing and reducing costs has a clear return on the time invested.
2. Estate management
Premises are expensive to run, so serious consideration needs to be given to how property is used. In the current climate, many organisations have adopted a working-from-home approach for administrative staff, so maybe it is time to consider whether selling property would bring in much-needed revenue or if renting out office space would return an income.
Savings of up to 40% could be realised simply by changing suppliers. It is a lot simpler than it used to be, but a lot of charities never review these costs on the basis that it’s easier to stay with the current provider.
Rising food prices can be a large burden on charities that operate care homes. By working together, charities can maximise savings while still receiving small deliveries of goods as and when needed. They stand to gain from bulk-buy deals available from major suppliers without needing to increase the order for their care home.
These may seem obvious points to explore but the key message is preparedness because time is of the essence. When changing suppliers, it can take time for savings to be realised and I have seen at first hand the impact of delays.
Working together, focusing on procurement at board level and auditing costs will help the charity sector survive what will undoubtedly be a difficult year.
My passion is to help those who need it most. That’s why, after working for a large charity for several years, I created the Charities Buying Group, which now has buying power based on the 56,000 charities we work with. We provide a free service. While others charge based on your savings, using a service such as ours gives charities access to procurement expertise while not adding to their costs.
Michael Hodgetts is chief executive officer of the Charities Buying Group.