Guidance for dealing with cuts
In these difficult times, many organisations are receiving news that their funding may be cut significantly. If you are in this situation the following tools and guidance notes may help you. If you are based in West Yorkshire; you may want to contact WYCAS to help you with using the tools or for support with dealing with any other financial issues.
Pricing and costing for a service and specific products
Full Cost Recovery
We have heard a lot about full cost recovery over the last 5 years but have you started to apply it to your organisation? Full cost recovery is about making sure that when you work out the costs of an activity or project - either for a funding bid or as part of your organisation's budget process - you include all the costs. We should all know what it costs us to do the things we do, and who is paying for it. See our full cost recovery good practice guide for a detailed explanation
Below are three excel templates (developed by CA Plus) which you are free to download and use as you wish. If you want help with using them please give us a call.
This full organisation template is designed to help you work out the budget for your whole organisation using FCR techniques. It allocates all your 'shared' or 'support' or 'overhead' costs in proportion to staff time.
The project template is designed to help you work out the budget for a specific 3 year project. It also uses staff time as the allocation method although you can change this as you wish. This template is designed for people who do not know excel, and are fairly new to budgeting.
The enterprise template is like the project template but it includes a whole section to work out your income from sales and fees for your enterprise.
Pricing and costing for a service and specific products
With more and more organisations selling services to individuals with a personalised budget it is crucial for organisations to cost out their products and services. These tools (developed by CA Plus) are built to help you see what your costs are, and whether the price and quantity you deliver are sufficient to make it all viable.
There are the two stages to the templates:
Step 1 - allocation of overheads
Step 2 - details for each product
And here is a worked example:
Step 1 - allocation of overheads example
Step 2 - details for each product example
Coping with cuts
Fiona Simpson, CEO NAVO
Everywhere we go there is talk of recession and public sector cuts. We know from our friends and colleagues in the local public sector just how difficult things are. We are acutely aware of the unprecedented financial pressures that public sector organisations are under. In addition to already-announced local cuts, all public sector agencies are under considerable pressure to identify and implement savings where possible. It is still too early to assess the full impact of these cuts, but we can undoubtedly predict a reduction in the level of funding available to organisations that deliver public services. We know from experience that voluntary and community organisations will be affected along with everyone else.
Some of us are heavily reliant on public sector funds and particularly vulnerable to cuts in grant funding. A reduction in public sector funding of the organizations coupled with the rise in demands for services caused by the recession means many organisations are required to increase their capacity at the time when they are highly unlikely to be funded to do so. The potential consequences can seem alarming even to the most experienced leaders, from downsizing and redundancies, dangers of mission creep or loss of independence, reduced staff morale and productivity, to mergers or even closure.
Whether we want to or not, all organisations will have to deal with some changes. Planning for what might lie ahead is vital if your organisation is to come through a recession and still be able to do its job effectively. It is therefore of high importance that the VCS starts planning for those changes. Here are some useful tips we have had to look at to help us at this difficult time.
Focus on your mission
• Concentrate on your core business and make sure your organization is doing what it is best at.
• Ensure you are clear about which of your organisation's activities contribute most to your mission. If you have to defer or cut activity you have a clear basis for doing so.
• Ensure your services are meeting your members' needs.
• Analyse the demand for your services - bear in mind that the recession may put a different slant on demand.
Tighten up financial systems
Make sure that you have an accurate picture of income, cash flow and costs so you can quickly address any issues.
Be proactive in recognising that your funding is likely to be affected by the cuts.
Discuss with your Exec Board/Trustees so they are informed and engaged in discussions and decision making
Expect to be engaged in discussions about how to achieve savings and cost efficiencies.
Start looking – in detail – at your organisation’s finances, and how they are deployed.
Is it possible for you to make changes now that will minimise the impact of cuts in the future?
Act quickly and decisively - good information systems are important
alongside strong governance.
Consider ways to reduce costs - back office suppliers, bulk buying or reviewing supplier contracts.
Diversify your income stream and consider mergers and collaboration
Seek advice from your local CVS or infrastructure organisation if you need help with this.
Strengthen key relationships
• Ensure that you are responding to the needs of the people that use your services and products.
• Communicate with all stakeholders and remember this includes staff and members.
• Retain and motivate your best staff
• Be realistic and optimistic about the increased demand on your services.
• Be clear with your Funders what they want from you and what you can provide.
• Contact your local CVS or Infrastructure Groups for support.
Dealing with Redundancies
• If your funding streams are coming to an end, the time may have come where perhaps a little more effort should go into planning your exit strategy, especially if the only answer/solution is that staff may no longer be required.
• As an employer you have a responsibility to deal with redundancies
• reasonably
• Make sure your staff are kept informed and engaged throughout the
• process.
• Redundancy payments will need to be included in projected spend and exit strategy.
WYCAS Good Practice Guides
The WYCAS Good Practice Guide on Insolvency and Full Cost Recovery maybe particularly useful at this time
Useful Websites
WYCAS
Contact WYCAS for advice and support on dealing with cuts, financial management and financial planning in challenging times
PERS
Contact PERS for advice on redundancy
NCVO
The National Council for Voluntary Organisations has produced an excellent and comprehensive package of guidance on coping with funding cuts: http://www.ncvo-vol.org.uk/advice-support
Getting Ready for Cuts is the National Council for Voluntary Organisation’s (NCVO) new service to help your organisation prepare for change. Find out more by visiting their website.
NCVO also have an online guide to coping with cuts which includes a range of free resources which you can download.