Charity finance policy Financial sustainability

Financial strategy and contingency planning for smaller charities

How can smaller charities set out a plan for their finances? Where's the best place to start? As part of CFG's new Small Charities Programme, cost reduction analyst James Rimmer explains what small charities can do now to plan ahead for 2022 and beyond.


Does your charity have a financial strategy? Perhaps that sounds like a lot of work. Even the smallest charities need a clear plan, and this will help you when producing your next Annual Report.

A financial strategy lays out your financial plans for the next three to five years. It should set your current key metrics and how they will change over that period.

A financial strategy needs to sit alongside wider plans for the charity. If they are not well developed a financial strategy is a great place to start a conversation with trustees about the future direction.

So, what should it include?

Desired financial future state

Where are you now? Where do you want to be? There is likely to be a gap that needs addressing. This could also be about keeping your current situation.

Think about your reserves over this period what would you like to happen to them? If you want them to increase by 50%, what needs to happen? Use your reserves as the driver here, once clear on those over the three or five years, work back to where they must be each year. Then think about what that means for cash, in year financial performance and your asset base, each year.

Do not forget about investments needed, be that replacement of assets or in other resources to deliver your purpose. An element of stretch here is vital and will form a basis of a good discussion with your trustees, this document should evolve following that discussion.

Core purpose and Core values

Reiterate the key purpose of the charity and its values. Does your desired financial future state move you towards them? As a charity you will have a clear reason for operating, your financial strategy needs to support this.


Organisation structure

Do you have the staff and resources in place to deliver your core purpose and values? If not, this is a good time to think about any investment required to deliver your purpose and take this into account in your future financial state.


Projects to deliver

It's likely to move from today to the place you wish to be in three or five years, there will be a gap that needs addressing, treat this as project that needs to be owned, with clear timelines and clarity around what success will look like.

Also, what are your contingency plans? What will you do if something unexpected happens? Think about this in advance.


Annual plan and actions

This should link to your project to deliver section, use your annual plan to make sure you are on track. Consider areas of vulnerability - a SWOT analysis can always be of use here.

Be clear on the tasks, when they should be completed and by who. Key to this is tracking and measuring progress.

Formally present a review to trustees at the end of each year about progress against the plan and refresh the financial strategy as a result. The financial strategy is not a fix document it can and should be updated each year.


Depending upon the size of your charity this might be a five-page document. Remember, it's your document and your key metrics. Do not underestimate how helpful this document will be.


About the author

James Rimmer FCMA MBA is a cost reduction consultant at Expense Reduction Analysts where he supports charities to innovate and spend less money.

James is a former chair of a charity audit committee, leading going concern conversations with auditors. He was a former CFO in the NHS, where cost reduction and financial planning were daily considerations.


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This post was last reviewed on 13 December 2021 at 16:05
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