Neill Summerfield, an Expense Reduction Analyst consultant, recently helped the Royal Academy of Dance save over £1m in costs. These are his top ten tips on how other charities can reduce their own expenditure.

Tip 1: Have a thorough review – Many charities decide to cut costs but don’t carry out a thorough review first and make rash decisions that might not be the most effective cost savings in the long run

Tip 2: Make a list and prioritise – After conducting a review, list every element of expense within the charity and look at the ROI of each of the costs, this will help make clear which expenditures to cut first.

Tip 3: Listen to staff – After recognising potential cost savings speak to staff about their thoughts on reducing the expenditure. They might agree or point out a reason whythe expense is vital to the charity

Tip 4: Be Objective – Weigh up all options and look at the issue from all areas of the charity before making the decision to cut or change supplier.

Tip 5: Shop around – It’s tempting to stay with the same suppliers for years due to lack of time to ‘shop around’, but this time can equate to large cost savings. What was the best deal 5 years ago probably isn’t now, so look at what other suppliers can offer.

Tip 6: Negotiate – Suppliers across all sectors and industries want your business so barter with them. Don’t automatically take the first offer; keep going back to each telling them you’ve been offered a better price.

Tip 7: Take Control – Many charities allow staff to make purchasing decisions butmanagerial control is vital to ensure costs are kept to an absolute minimum. If this is not possible all purchases need to be visible through statements and receipts.

Tip 8: Read the small print – Charities often get stung as they haven’t fully understood the legalities behind contracts and agreements with suppliers. Always read the small print before signing any contract and seek advice if unsure.

Tip 9: Keep up-to-date – Technology is evolving as fast as ever and there are always new ways of making tasks quicker and easier.

Tip 10: Don’t lose sight of quality – In difficult economic times cutting costs might seem like the only way to survive, but never make any decisions that will impair on the quality of your services. It’s just not worth it.

In a recent blog posting I commented on “Managing Charity Finances Through Uncertain Times” – a Baker Tilley report on the actions charities were taking to reduce the impact of lower income on their charitable works. Another report has recently revealed how important tackling the costs and the perception of a charity’s efficiency is to actually raising money.

“Philanthropy: Barriers to Giving”, a report commissioned by Barclays Wealth detailed a survey taken of 500 high net worth individuals and their attitudes to philanthropy and how they choose the charities they wish to donate to. Three numbers stand out from the report;

89% feel “efficiency” is the most important factor when choosing which charity to give to.

88% cited the amount spent on administration was a determining factor.

82% said that “charities will be forced to become more efficient as people begin to demand greater efficiency from the causes they give to”.

Putting the two reports together we learn that charities are worried about their levels of income. Donators are concerned that their donations are going to be used efficiently and choose their beneficiaries on that basis. There is a virtuous circle to charities cutting their costs. By cutting your overheads you are in a better position to generate more donations.

In a recent survey 83% of charities questioned expected government funding to only stay the same or decrease in the next twelve months.  In fact two fifths of them thought it would decrease significantly.  Nearly 90% of them expected the same of their investment income.   The Baker Tilly report “Managing Charity Finances Through Uncertain Times” highlighted the funding issues that charities face and questioned them over the actions they’re taking to cope with the, I would say “uncertain” outlook, but it seems all too certain to the charities.  Nearly 25% of respondents were in danger of running at a loss and draining reserves as they struggled to fully cover the costs of providing services.

So what are they doing to mitigate the pressure on income?  60% are looking for new sources of finance and 30% are looking to spend more on fund raising activities.  But with nearly all of those surveyed saying that they’re not seeing any improvement in the economic climate at the moment, and half of them not foreseeing improvement until at least the end of this year it’s going to be a tough battle.

Obviously the charities are looking to make savings.  Worryingly, this list included nearly a third of charities reducing their work, 10% closing down some of their projects and 10% reducing staff salaries.  Other action cited was the sale of assets, increasing the overdraft and deferring payments to suppliers!

Before such dramatic steps are taken it was gratifying to see some were looking to “reduce other costs” (albeit less than half of respondents) but it is worrying that more charities were cutting projects than considering their procurement!  In fact, it can be worth (and indeed is essential) charities look at their overheads first to see what can be saved before cutting back on their good works.

It may be some relief to them that by concentrating on reducing overheads, worthwhile savings can, undoubtedly, be found.  All charities and not for profit organisations should consider mundane things like; office costs (stationery, postage, photocopiers and the like), insurance, banking fees, telecoms, utilities etc.  Hospices, hospitals etc should look at janitorial supplies, laundry and even medical products.  Housing associations and homeless charities can consider things like buildings maintenance.  A finance director might be able to find that with a 20% reduction in his non-core costs an essential project or a number of key workers positions can be retained or even added.

The report’s authors commented in the summary that “Some (charities) have not made use of the good advice already available” and that “Charities should…bring in professional advisers where appropriate”.  At Expense Reduction Analysts we can help look at your overheads and through cost management and procurement bring about savings that can directly benefit your projects.  A number of charities have already saved money after a “no savings no fee” review of expenditure which has allowed them to apply more resource.  If, as a charity manager you need time to concentrate on finding new sources of funding then please contact us.  Closing projects, selling assets, delaying payments to suppliers and running up the overdraft isn’t going to help anybody!

More than a third of hospices expect they will fail to raise enough money this financial year to fund their services. A similar number are expecting a funding gap in the next financial year, which starts in April. Hospices provide essential medical and respite care for patients who are terminally ill, or who have life-limiting medical conditions. The nation’s independent hospice charities provide more than 2,000 beds for end of life care.

Key facts about hospice care:

* Hospice care is given free of charge.
* Hospices support the patient, family and close friends.
* Most adult hospice users are cancer patients.
* Many children in hospices have progressive, degenerative conditions.

Running the 195 services costs £484m a year, but only a small amount of their funding comes from the NHS. In England, the average level of government funding is 31% for adult hospices, and just 15% for children’s hospices. The rest comes through charitable donations from the public.

Mark Relf, senior fundraiser at the Pasque Hospice in Luton, said: “People have got less money in their pockets; donations are down by as much as a third in some instances. People are worried about their jobs, people are losing their jobs; so they have less disposable income to give to charities,” he said.

The research was carried out for Sky News by Help the Hospices and Children’s Hospices UK. It shows that 14% of hospices are already considering cutbacks in services.

Pasque Hospice charity’s chief executive David White told Sky News: “The ultimate option for us would be the need to shut beds. That’s the thing we would avoid more than anything else. But so many other things we do for people – bereavement support, and so on – are under review and potentially at risk.”

Before enacting service cutbacks, hospices should consider engaging Expense Reduction Analysts to carry out a thorough review of all overhead expenditure, on a “no savings, no fee” basis. Their experts have already worked successfully with a number of hospices and have achieved average savings of 20%, in cost categories as diverse as; medical supplies, laundry, utilities, insurance, communications and janitorial supplies.