Back to basics: financial planning

Share out fixed costs to calculate at the true value of your work, says John O'Brien, chair of the Community Accounting Network

I want to ask you three questions about your organisation. What do you do? How much does it cost you to do it? And who is paying for it?

It is quite frightening how many people struggle to answer these - even the first one.
Whether you are trying to work out the costs of a project for a funding application or tender exercise, or considering the next budget for your organisation, knowing the answers to these questions will help you in many areas of your work.
You need to know how your activities are financed. The costs fall into two types: direct costs and support costs. Direct costs are those that clearly relate to your activities, such as the salaries of staff.

However, you also need to cover support costs. Consider the rent charities pay. No one funds us to sit in offices, but the rent needs to be paid. You can add up all these support costs - rent, accountancy and so on - and share them out between all activities. That way, you can see the full cost of each service as well as, for example, how much a £10,000 grant will cover.

The tricky bit is deciding how to share out the support costs. There are some tools that might be of use at

If you do this, you may find that your funding is not sufficient and some activities are putting a strain on your finances. Perhaps your fees are too low - or too high. And now that you have good information, you can do something about it.

Finance Advice

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