Reduce costs for your Church or Charity

If resources are currently tighter for your church or charity, you’re not alone. Many organisations in the charity sector, especially smaller charities, are facing financial challenges with costs rising faster than income. So, let’s look at how you can reduce costs so that your church or charity can keep fulfilling its vision.

Indeed, charity trustees have a duty to exercise good stewardship and to ensure money is spent in line with the charity’s aims and objectives.

If you need to review your charity’s budget as a whole, check out this practical guide to creating a budget for churches or charities.

When any charity or church has to deal with financial pressures, there are 4 main responses to consider:

Opportunities to increase income: This can include making better use of your assets (hiring out rooms), external fundraising, grant applications, or encouraging existing donors to increase their support by simplifying the donations process, and making sure you’re claiming Gift Aid and GASDS where you can.

Actively reducing costs: You may need to try and reduce your expenditure, either in the short or long term.

Cashflow: Whatever the size of your balance sheet, in a season of financial restrictions, ‘Cash is King’. When cash is gone, the game is over! Do you have access to sufficient cash funds to meet your monthly outgoings (bills, rent, utilities, salaries, etc.)?

Financial sustainability and risk management: How is your level of reserves? Can you use some of the cash on your balance sheet to help you manage a season of reduced income? Read more in this blog on risk management.

In this blog we’ll look at ways to actively reduce your expenditure in the short term and long term.

How to actively reduce costs for your charity

Whilst you will need to spend some money on ‘overheads’ this should be at an appropriate level. Without proactive management, spending on overheads will typically increase leaving less money available for ‘front line’ work.

If you’ve identified a need to reduce your organisation’s expenditure, here are six top tips to consider:

Insurance – is your provider still the most appropriate? Does your premium still include that high-risk activity for which you had to take out extra cover 3 years ago, but haven’t done since? Can you make changes to your buildings and systems which would reduce your risk level and therefore your premiums? Are you making good use of the insurance policy by meeting its requirements? There’s no point in paying it to discover it’s not going to cover you!

Utilities – what charity discounts are available to you? Can your local council provide free refuse and recycling collections? Would locking into a fixed rate deal be beneficial for you, or is a variable rate better? (This will depend on your cashflow, risk appetite, and various external factors).

Systems costs – are you still using all the systems you’re paying for? Are you getting the best value for money or are there more efficient alternatives? (Be careful though. Cheaper isn’t always better, depending on the functionality, ease of use, and hidden costs for additions such as extra users).

Servicing unused equipment – are you still using the server which you’re paying an annual maintenance fee on? Are you still paying for a monthly backup of data which now lives in the cloud and is being backed up for free? Do you have new skills on your staff team which means you don’t need to buy in expert advice/consultancy any more?

Printing – is the deal you have on your printers/photocopiers the most suitable and efficient for you? Is it tying you into multi-year costs with no break clause? Do you need to be printing as much as you are? Can you offer digital/downloadable alternatives? Could you invest in display equipment to project content to a whole room and save money on printing in the long run?

Employer NI allowance – if you have employees and your annual National Insurance (NI) bill is under £100k, you’re probably eligible to claim the £5k employers allowance from HMRC.

Don’t forget to make use of charity procurement specialists such as 2buy2, Charity Digital and Charity Digital Exchange. It is helpful to keep a register of suppliers, contracts and standing orders to make this process easily repeatable.

Longer-term cost decisions to help you save money

As well as considering the practical steps outlined above to reduce costs, here are some other factors to guide your conversations and decisions around saving money.

Understanding your cost base

A good understanding of where your money is going is key. You also want to consider why, how and how often you make changes to your expenditure. Here are some questions to get started:

Which costs are fixed (rent, insurance, etc,.) and which are variable (utilities, staff overtime, hospitality costs, consumables)?
Which costs are discretionary (new initiatives, or other “nice to haves”)?
What expenditure are you committed to under contracts or other obligations?
If you prepare accounts on an accruals basis, how does your cash flow and recorded income/expenditure differ? Do you have a good understanding of this? Do you need to do multi-year forecasting if this looks different in different years?
Is your level of giving to other causes still appropriate and sustainable if your income base has changed since this expenditure was introduced?
Are you getting at least 3 quotes for new / renewed expenses? How can you be sure you’re getting the best deal? Do you have the right expertise and governance structures to decide which suppliers to use and why? Never feel pressured into saying yes to sales calls. Instead, take the time to step away and make an informed decision with the right evidence and people in the room with you.
How much is your staffing costing and is this sustainable? What would a restructure look like, if needed? These changes can often be painful but as staffing is often a church or charity’s biggest area of expenditure, it’s important to ensure that your staffing structure is:
- Appropriate to your needs
- Providing good value and impact
- Affordable

Reducing staffing costs

Having looked at all the options above, your charity trustees may conclude your church or charity needs to reduce the cost of staffing. Where this is the case, you should:

Follow a fair and consistent redundancy policy and process.
Look at all solutions to mitigate the need for redundancies (e.g. temporary wage reductions, temporary layoffs, voluntary redundancies, hiring freezes, reduction in hours, secondments, etc.)
Consult with your team to hear their suggestions.
Take your time and don’t rush the process. Painful decisions and outcomes are even more painful when rushed.
Seek external advice when needed. Check out Churchworkers.net, Anthony Collins Solicitors and Keelys Solicitors for help and guidance.

Are we ‘sticking to the knitting’?

Charity trustees have an obligation to ensure all expenditure is in line with the charity’s objectives i.e. that you’re sticking to the knitting. But even more so when times are tough, you should focus on and prioritise your core charitable purposes. Are you running any services, events or initiatives which are ‘nice to have’ but not core to your organisation? If this is the case, it may be beneficial to pause or stop them.

Other suggestions to reduce costs

Don’t forget smaller subscriptions and monthly bills. Are you on the best rates for telecoms, broadband, IT software, website services, etc? These all add up!

Try re-budgeting to achieve a flat rate reduction across all areas of expenditure. Is a 5% reduction realistic if every department or area of activity nips and tucks a bit? Encourage your finance team to hold a detailed budget discussion with each budget holder, asking them for their suggestions as to how a % reduction can be achieved. Ensure that any cuts are still compatible and aligned with your charitable aims and purpose. You may need to ring-fence and protect some areas of expenditure and seek greater reductions elsewhere. Accounting software with real-time, drillable and accessibile reports, like ExpensePlus provides, can help your team create the budget you need.

If needed, place a freeze on non-essential spending. This may mean travel, equipment purchases or delaying launching new initiatives. Can the lifespan of IT equipment such as laptops be extended for an extra year or two, without causing unintended consequences?

Work your way through your existing stock of materials and consumables before buying more. Often charities end up buying new items without realising what they already have available. Cataloguing your current stock of consumables can help with this.

Ask others for help to reduce costs

There are multiple sources of support, both peer and professional. Some of the bigger changes we’ve mentioned above might mean you need to engage a lawyer. For others, you might want to consult your Independent Examiner who should already have performed checks into your ‘going concern’ and sustainability.

Additionally, it’s worth contacting previous managers or trustees of your organisation to ensure you have the full history/organisational memory needed to make the best decision. This issue may have occurred in a similar set of circumstances 5 years ago!

ExpensePlus is a cloud-based fund accounting software package designed for churches and charities. ExpensePlus makes managing fund accounts simple and straightforward.