Four ways to cut costs (without harming the front line)

Doing more for less is tricky to achieve. Liam Kay explores how charities can get more bang for their buck and keep more money for their charitable work

Over more than a decade of austerity, charities have had to work hard to make every penny count while dealing with increased demand on their time and resources. To make savings while keeping the front line firing on all cylinders is not easy, so here are four tips that could help, from experts who put them into practice.

1 Stop wasting employee time

In any organisation, the working day is filled with tasks that are often unnecessary, duplicate other people’s work or simply take more time and effort than the end product warrants. The first challenge is for charities to identify tasks that can be removed, allowing staff to free up time for more important projects.

One charity that successfully saved more than £1m by removing wastage and duplication across its operations is the British Heart Foundation. Martin Miles, chief financial officer at the BHF, says that the adoption of Lean Six Sigma – or "continuous improvement" – has been a "revelation to me and to the organisation".

Continuous improvement, in the BHF context, involved using a small team of people to map out the processes used by teams across the organisation, removing any that were not strictly necessary.

Miles cites the example of the schools team at the BHF, which struggled with the volume of activity. The continuous improvement team found 80 per cent of activity was unnecessary. For example, the schools team was taking two days to confirm with participating schools that new equipment would be sent to them, re-examining each school to see if it qualified. The team advised simply reconfirming the school as a member of the programme and sending it the equipment: a two-day job is now done in minutes.

By deploying Learn Six Sigma, Miles says, 30,000 hours a year across the BHF have been saved, allowing staff to focus on other activities and saving money. "It is just understanding what you do and questioning each step to see if you are delivering what the customer needs in a safe and controlled way," he says. "If any steps are unnecessary, remove them."

2 Get the right technology

Technology is too often touted as a silver bullet, but the right tools can make time-consuming and antiquated systems sleek, easy and over in seconds. Miles says this often needs initial investment, but adds that the long-term benefits can be substantial: when the BHF changed its system, which involved charity shops posting staff timesheets to headquarters for processing to a computer system that allowed the task to be carried out in minutes, shop managers were freed up to run the stores properly.

Kate Sayer, senior consultant at the specialist auditors Sayer Vincent, says that charities can also make significant savings if IT renders some of their overheads unnecessary.

For example, video conferencing can reduce the need for staff to travel, particularly internationally. Charities could also save money on their premises, either by sharing with other organisations or using flexible or remote working to facilitate a smaller office; with the right IT in place, staff could be happy working in smaller, better-designed and cheaper offices, or even just at home.

"Try to see a different cut of the financial information, or get it presented in slightly different ways so that people become aware of some of the costs," Sayer advises.

3 Look at your procurement

Significant savings are to be had in procurement. The skill is identifying where those savings can be made and negotiating a good price with suppliers where possible.

Miles suggests that charities adopt a more corporate culture when negotiating contracts with the private sector, cultivating a mindset in which they see themselves as large organisations on a par with big businesses, rather than feeling inferior.

"We experienced elements of not wanting to upset the supplier," he says. "That is the wrong way around in that relationship: they should be desperate to keep us satisfied."

By putting services out to tender, often bundled up into larger contracts, charities can find they get more bang for their buck and that existing suppliers are willing to drop prices.

Miles says this requires staff to see the charity’s spending on services such as cleaning and maintenance as their own money and look for opportunities to get the same services provided more cheaply.

"We have a greater obligation to get more value for our pounds because someone has donated them to us," he says. "It is just trying to do our job properly. A lot of what we have done is cultural change to make people feel comfortable with that."

4 Invest where needed

Cutting costs can achieve short-term relief, but sometimes investment is what is really needed to achieve long-term savings. David Ainsworth, sector specialist at the Charity Finance Group, says charities should ensure that central functions are properly resourced, such as HR, finance and governance, allowing front-line staff to focus on delivering charitable benefit.

"The idea of simply cutting costs, as opposed to improving efficiency, is one we’d urge charities to approach with caution," he says. "Our message is that efficiency most often comes not from reduced expense, but instead from investment in professional staff and strong structures, and making sure that’s supported with the right tools and technology.

"The message from our members is that the foremost efficiency increases come not from short-term cost-cutting, but maximising the time that staff can spend focusing on helping people.

"This is a place where funders can hugely improve the efficiency of charities by offering unrestricted funds, full cost recovery and long-term support."

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