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Update your budget and cashflow

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The financial pressures on voluntary organisations during the cost of living crisis can change rapidly. Use this page to help identify how the cost of living crisis may impact your organisation's finances.

You can use the guidance to consider how the cost of living crisis might impact the money you have coming in (income) and what you're spending (expenditure).

About budgets and cashflow forecasts

Most voluntary organisations have two documents which help them plan and understand their income and expenditure:

  • Budget: The income and spending plan based on what you are planning to do.
  • Cashflow forecast: Your prediction of when income and expenditure will arrive and leave the bank account.

To learn more about creating budgets and cashflow forecasts, read our guidance on financial management.

Budgets and cash flow forecasts are critical parts of your broader business plans. NCVO members can access our business plan template.

Don't delay updating

The financial pressures due to the cost of living crisis can change fast. You may not understand the risks when you don't have an accurate idea of your income and spending.

The earlier you get to know how the cost of living crisis impacts your financial situation, the earlier you can act. When you spot potential financial problems early, you may have more options to work through them.

Update them regularly

Many organisations update their budget and cashflow documents every six months – (usually at the start of their financial year and mid-way through the year).

You should consider updating these documents more regularly if you think the financial pressures of the cost of living crisis may impact your organisation.

Understand your fixed and variable costs

Understand which of your costs are regular or one-off (sometimes called fixed costs) and those which are less predictable and will change depending on your activities (sometimes called variable costs).

During the cost of living crisis, you may see significant changes to these costs. Understand if this will be a one-off or repeating cost and whether higher prices will continue or are likely to be reduced.

Learn more about fixed and variable costs.

If necessary, prioritise updating your cashflow

It would be best if you update both documents regularly. However, if you’re worried about your finances, prioritise updating your cashflow.

Your cashflow will predict:

  • how much money you have in the bank at any one time
  • and whether you will have enough money to cover your spending.

When you don't have enough money to pay bills that are due, you may become insolvent and would need to cease operations.

Learn more about this in our guidance on insolvency.

Tips for updating your budget and cashflow forecast

When updating your cashflow during the cost of living crisis, you should consider these options:

  • Only include probable future income: Be cautious of all income generation being successful. Include the likely income. Avoid adding income where there is a low likelihood of success.
  • Include higher future costs: Include updated estimates of the current higher costs of utilities and consumables (like stationary or resources) you use in your services or provision. Think about if any costs might go even higher. Sometimes suppliers may be able to let you know if their costs are set to increase.
  • Include all expected spending: Confirm that all expected spending included in your cashflow forecast is likely to happen. Only include spending which is clear or realistically going to occur. Don't include anything which might not happen because of other events.
  • Check timing: Check figures are included in the correct month when bills are due, wages are paid (for example, for seasonal staff or one-off consultants), or grants are likely to be received. This will show you higher-risk periods of time where cashflow may be difficult.
  • Look at future years: While you may have a good cash flow in the immediate future, it's unlikely that many costs – like utilities and consumables – will fall soon. Looking in the longer term, you can see when ongoing higher spending or lower income would become a problem. A forecast which stretches longer into the future could also show when upfront spending on fundraising or other forms of income generation may bring in cash.
  • Describe your assumptions: All cashflows are based on assumptions. Always explain your assumptions to others. You can include notes or information to help others understand why and when you think income or spending would be happening.
  • Produce different scenarios: Consider producing different scenarios of your cashflow. Some might have more positive assumptions – like reaching your fundraising target – and others might have more cautious assumptions – like missing your fundraising target by 30%. Different scenarios will give you a better idea of the risks involved.

When your cash flow forecast is updated, follow our guidance to understand what your budget and cashflow might mean for your organisation.

This page was last reviewed for accuracy on 30 October 2023

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