The initial shock of the lockdown in March to combat Covid-19 was a big blow to society and we abruptly got used to staying at home, adapting to living and working in a different way. After two months, we are now preparing for life after lockdown, and for many charities this will be more challenging than the pandemic itself.
Notwithstanding operational issues, furloughed staff and remote working, charities will be extremely concerned about their cash-flow in the short and medium term. The immense government life-support to keep businesses afloat and people in work will slowly decline and it will test charities’ solvency as life slowly gets back to normal.
Despite well-prepared risk registers and disaster recovery plans, few charities - if any - will have planned for the Covid-19 crisis. We see major financial difficulties facing charities who do not have strong liquidity to cope with the mismatch of increasing demand on their services or grants, and a significant drop in income - 30% or more - in the next 18 months. Financial deficits are perfectly acceptable in charities so long as they are not structural.
Many charities are in a strong position, especially those which have acted with considerable speed and creativity to adapt. Other organisations, especially those offering public services, are waking up to a slow recovery, are floundering to make practical decisions and have a mountain to climb. The harsh reality is some charities may fail.
This is the time to call on charity reserves and bold leadership; we believe that with a sound financial strategy and possibly some tough decisions, most organisations will survive the aftermath of Covid-19 whatever it brings.
A good way to share the burden is to talk through your thoughts and the issues you are facing; Yoke and Co will offer a free 30-minute consultation to the first 10 charities who would like truly independent and confidential advice on their finances.