Incisive Financial Understanding

CHARITY 'L'

This was a small, specialist housing association which, in the words of the trustees, was 'haemorrhaging cash'. From the start fund-raising had been assumed to be straight forward but the cause that had seen the charity created was no longer seen as fashionable. Based on current income levels, projected cash flow pointed to closure in 6 months.

First step was to change suppliers so that goods and services (of equal or better quality) could be sourced at more competitive prices. Next, contracts and services for service delivery were re-negotiated to reflect the actual cost of service provision - not the (acknowledged) artificially low price previously agreed.

The immediate impact was to transform the relationship between income and expenditure. This, in turn, filtered through to the improved health of tenants (as the threat of closure receeded). And the charity was able to plan for a future with growth not impending closure on the agenda.

What does this case demonstrate?

Renegotiating previously agreed contracts and service levels is tough to confront and achieve, even when it looks like this is what needs to happen. The parties benefitting from the status quo can (at best) be disinterested and even intransigent.

But doing what it takes to ensure all costs are integrated into a sustainable financial management plan for the charity is essential, whatever the short term pain.