Our financial position and the importance of timing

Use this page to learn more about understanding your organisation's financial position and recognise the importance of timing when working through financial difficulties.

It’s not always easy to figure out the true financial position of a charity. There can be many moving parts requiring a complex financial management function. This is often beyond the resources of many charities, smaller charities in particular.

If you think you’re approaching financial difficulties but are unsure of the exact financial position of your charity, you may need specialist support to help make sure of this.

There are many good charity governance, finance and leadership specialists available on a freelance and consultancy basis who can help who are mentioned in our further support and guidance section.

Even when we have reliable and quick access to our financial information, it’s not always easy to know when our charity’s financial difficulties are temporary and when it’s more serious. After all, most charities need to work hard to build financial sustainability.

Temporary difficulties come up for many reasons. For example, when a grant or contract payment is late or when an unexpected item of expenditure comes about. This can often be solved by drawing on reserves or delaying non-essential spending.

Other times, the difficulties may continue for a longer period. It might be that a key income source is coming to a permanent end and efforts to replace the lost income have been a challenge.

In this case, reserves could be used up and if the situation continues, in extreme cases, there may be little to no hope of financial recovery.

It‘s important that trustees and leaders take steps in good time. This is to figure out how big the problem is and find out if it’s likely to be temporary or ongoing. Managing financial difficulty is most effective when starting early.

• To understand more about managing your charity’s financial challenges, the Arts Council offers The Managing Financial Difficulties Guide and Toolkit for support with your charity’s finances.

Some places where you can find consultant support in this area include:

• Consultants for Good are another network of experienced specialists
• Cranfield School of Management provides pro-Bono consultancy
• Access our online training on finance for voluntary organisations
• For a useful overview of guidance on insolvency, The Chartered Governance Institute UK and Ireland and Bates Wells have created a practical resource called Dealing with financial difficulty: legal and practical measures to consider for charities and social enterprises.

NCVO worked with Liz Pepler at Embrace Finance to create this guidance.