Many organisations will be looking at how they can reduce or change their spending. Use this page to:
- learn key questions to ask yourself before you decide on cost reductions
- get practical ideas of how to cut costs.
Before making any decisions, read our top tips for reducing costs.
- Be realistic: You should be realistic about the reductions that you can make. Some costs are difficult to avoid or may take time to reduce.
- Meet your legal obligations: Most organisations have minimum legal requirements, which will have cost implications. You must:
- keep the insurance you need
- maintain buildings and equipment to be safe
- make sure there’s training in essential areas like health and safety or safeguarding.
- If you're an NCVO member, use our legal compliance checklist to understand the legal and compliance issues that need to be considered.
- Focus on your core purpose: Every organisation or group has a core purpose – the change it seeks to achieve. Make sure you – and your team – read your governing document (sometimes called your articles of association or constitution). For charities, this will include a summary of your charitable purpose. Charities must always be working towards their public benefit.
- Beware of how you make decisions about reductions: Avoid reducing all budgets by a set percentage. This can impact some activities greater than others. Consider what spending puts you in the best position to achieve your charitable objectives in the long run.
- Meet your duties for non-discrimination: Some reductions in spending may impact certain groups more than others. You should:
- be mindful of your non-discrimination duties.
- make sure that any policy or provision change doesn't indirectly discriminate against a particular group.
- Read our introduction to how organisations can approach equity, diversity and inclusion.
- Think long term: Depending on your circumstances, you might want to spend more in the short term to achieve longer-term changes. For example, introducing new technology or systems may be more efficient but may cost more in the short term. Always carefully consider savings even if there's an investment cost.
- Get the right advice: You may need professional advice to reduce your spending effectively and in a way that meets legal duties. The upfront costs may allow you to save money in the long run.
- Read more in our:
Almost all significant cost reductions can impact:
- how you operate
- how you deliver your work
- the success of the outcomes you achieve.
Always be open and clear about the impacts of reducing your spending and activities.
Potential impacts to consider include:
- Team wellbeing: Staff and volunteers are one of the biggest assets to any voluntary organisation. Consider how staff and volunteers may be impacted by reductions and use this information to work out the best approach for your context. Read our guidance on supporting the mental health and wellbeing of your team.
- Team activity: If you reduce spending on activities, consider if this impacts the work staff or volunteers can deliver. With lower budgets for activities, do any roles need to change?
- Team workload: Where the reduction in spending impacts your staffing, you may need to consider what tasks to remove or reallocate and make sure the change in staffing is realistic and reasonable.
- Service quality: Consider how changes may affect the quantity or quality of the goods, facilities or services you provide.
- Higher long-term costs: Reducing spending today can lead to higher costs in the future – for example, not investing in maintenance and reducing preventative measures (such as health and safety costs or training or investing in software which prevents cyber attacks) can result in much higher costs down the road.
- Wider impacts: Will your reduction in spending impact other third parties? These could be other voluntary organisations you currently offer grants or contracts to or local businesses you purchase supplies from.
Reduce current costs
Consider any practical steps to reduce costs, even for a limited period. Reduction may have an impact on your staff, and decisions must be taken holistically. Here are some ideas to consider:
- Limit discretionary spending such as attending conferences or travel costs. Make sure that any non-contractual required benefits for staff are necessary, meet business needs and are in line with similar organisations.
- Review membership and subscription costs and confirm that all recurring spending on software, services and publications is bringing benefits and is used by your team.
- Reduce overstocking or production by checking that rates of purchasing materials match up with demand. Make sure any excess stock of cleaning materials, stationery or other recurring goods is used.
- Avoid purchasing new equipment or products and maximise what you can buy ‘ex-display’ or second-hand. Operational equipment or furniture is often available with minor damage at significantly reduced prices.
Review costs from your suppliers
Once you have a clear list of essential goods, services and facilities which you currently and will continue to need, think about how you can reduce their costs.
High inflation can put extra pressure on previously reliable suppliers. You might not be getting the best deal from your existing suppliers.
Changing suppliers can be time-consuming, but researching options could help to check you’re still getting good value.
- Confirm the need of suppliers: Check that each of the services you purchase are necessary. Consider if when you started these contracts, you had agreed to 'add-ons' which are no longer needed, provide value for money or you’re able to have given your cost pressures. Consider whether you can reduce or restrict these additions.
- Research contracts and speak to similar organisations: Check the current terms of any contracts with suppliers. Speak with like-minded organisations to benchmark their costs and benefits. Research what other providers may be able to offer you.
- Check you’re gaining maximum charity discounts: Some commercial suppliers, such as those providing computer software, provide discounts for charities. Always check if existing suppliers have any charity discount scheme and whether these reductions have been included in your costs. Read our guidance on the best ways to get discounts from the software industry.
- Maximise membership: Many umbrella bodies can enable you to gain discounts from their trusted suppliers. If you’re an NCVO member, you get access to a wide range of trusted suppliers who can save you time and money.
- Register with charitable discount schemes: Some charities specifically seek to reduce the costs of goods for other charities. Look at whether you may be able to access discounts from schemes such as Inkind Direct.
- Be flexible: Achieving absolute lower prices may be challenging. Try to consider whether there are also wider negotiations that increase efficiency or lower costs. Consider whether there are other ways to create savings by extending payment or contract terms for cheaper rates or gaining discounts by bulk ordering.
- Test the market: Consider approaching other suppliers for better deals. See if your current supplier can match other options for deals.
Reduce energy costs
Currently, higher energy costs are a major cost for many organisations. Use our guidance on managing energy costs and being energy efficient.
Change your plans
Consider whether you need to:
- cancel or delay any expansion of new services or provision
- cancel or delay planned existing activities
- find lower-cost ways of delivering activity – for example, by moving activities online rather than face to face.
Read our specific guidance about business planning to learn more.
Actively consider whether a collaboration with a like-minded organisation might allow you to save costs or continue activities that would be otherwise reduced or stopped.
Read our specific guidance about collaboration to learn more.
Consider your team size and structure
Staff are one of the biggest assets of any voluntary organisation. When you're reviewing your current situation, you may have identified that you will need to change roles, team sizes and structures. It’s important to keep in mind that employees have legal rights when their organisation seeks to change their terms, conditions, or employment.
Read our guidance about managing change with your team, including proposing redundancies, to learn more.
Staffing costs are often one of the largest areas of spending for voluntary organisations. Review your approach to staffing to make sure that you have the right mix of roles and seniority and with appropriate terms and conditions. Make sure you have the right structure to meet your charity's goals while providing staff with security.
Read more in our guidance on setting salaries.
Consider costs for overtime or agency staff and the benefits they bring (as these roles can be more costly for organisations).
Make sure that changes or additional costs for interim roles are approved and monitored by the relevant decision-maker in the organisation (such as a member of the leadership team).
Consider outsourcing functions
You may want to consider whether you outsource functions in your organisation. For example, rather than having your own HR, finance, IT, marketing or digital staff, you may be able to buy this from a specialist company.
Sometimes, the costs of paying a specialist part-time can be cheaper than having a full-time employee.
Outsourcing can bring you access to a higher range of skills with lower long-term liabilities. You can also gain from their experience working with a wide range of different organisations.
However, there are disadvantages too. You will have less control over an outsourced provider than your staff.
It could lead to challenges in communication as they're not part of your work day-to-day or understand the context of your charity's work. It also changes your work culture and relationships within your team.
Charities must carry out due diligence checks on partners and can also monitor end use of funds. You should have reasonable assurance that the partner is capable of delivering the proposed activities or services and has in place appropriate systems of control.
Your service provider may charge you Value Added Tax (VAT). Depending on your charity's VAT status, often these cannot be recovered and may impact any savings. Always seek professional advice.