The Rev Willie McPherson of the Vine Trust is unusual among directors in the charity sector. He has a plan in place to extend the work of the trust, which is based in Bo’ness, Scotland. The organisation is dedicated to transforming disadvantaged communities overseas — and McPherson is confident that he could fund its expansion with a bank loan, repaying the money by expanding into England.

“With this increased activity, we would get increased donations,” he says. And borrowing money now would save money in the long term. “We would also be able to invest in some micro-enterprises in Peru so that they would become self-sustaining, then we would not have to pay out each year as we do at the moment.”

Not-for-profit organisations have to take questions about money and affordability very seriously, says Ian Reed, chief executive of Scottish Sports Futures, which uses sport to help young people. “For any social enterprise to be sustainable it has to be organised along business lines.”

For a start, cash flow matters: organisations should have sufficient cash in reserve to cover basic costs such as staff wages for three to six months. But this is not always as easy as it sounds, particularly for charities. “If you are 100 per cent grant-reliant and you ask a funder for extra for your reserves, there will only ever be one answer,” Reed says. “That’s why it’s important for none of us to rely entirely on grant funding. There have to be other income streams.” These could range from corporate and individual donations through to money raised through trading, as in a social enterprise.

Midlands-based Acorns Children’s Hospice Trust, which cares for children with life-threatening or life-limiting illnesses, gets about 70 per cent of its cash from fundraising, 15 per cent from its 41 charity shops throughout the region and 15 per cent through local primary care trusts. The children’s hospice movement has been lobbying hard for the latter figure to rise to 30 per cent within the next few years. Last year, the government said it would allocate an extra £30m to be spent on palliative care for children between 2008 and 2011.

Partnerships with local businesses play a key role in the charity’s fundraising efforts, says David Strudley, Acorns’ chief executive. The biggest of these is with Aston Villa football club, which has been a longstanding supporter and which gave Acorns pride of place on the front of players’ shirts this season (to get a sense of what this could be worth, Manchester United recently sold their shirt sponsorship rights for about £80m over four years).

“We believe that the only way to make the brand Acorns really mean something to the wider community, given that [dying and seriously ill children] is not an easy topic for people to talk about, was to find a platform that would really get it noticed,” Strudley says. “The shirt sponsorship has transformed support for us here in the West Midlands.” This higher profile, he believes, helped Acorns to build partnerships with Birmingham airport and the Bullring shopping centre.

When establishing such relationships, Strudely recommends taking a long-term approach, based on mutual benefit. “Potential partners who have indicated a willingness to work with us have done so because they see the broader perspective as being advantageous to them in marketing their products.” He says such partnerships should be negotiated by the charity’s chief executive or executive director.

“Third sector” organisations and charities should also remember that banks can offer a wide range of services and advice to help them make the most of their money, says Morag Fenwick, a director in the not-forprofit team at Bank of Scotland Corporate. “We don’t tell organisations how to run their businesses,” she says. “They’re the experts in charity. But we can tell them how tomaximise the income available to them.” For example, the bank can check whether investments and savings accounts are performing as well as they should and suggest ways to invest money to maximise income without compromising cash flow.

“We can help them to cut costs, for example if we discover that they are spending too much on insurance or bank charges,” she says.

Charities that work overseas can accumulate significant costs by transferring money in and out of different currencies, so the bank may recommend setting up an overseas account.

It is also a good idea to get someone with business experience involved directly with your organisation, perhaps as a trustee or director, Fenwick adds. “People from outside the sector can add to the expertise available to a charity. Especially in this difficult financial climate, if a charity does not have someone with the right financial experience they may not recognise the signs that they are getting into trouble.”

Charities should not be afraid to approach businesses to find volunteers with the skills they lack. “The bank and other organisations will also, in certain circumstances, look at secondments,” Fenwick says.

PDSA

Two-thirds of the pet treatments offered to people in need by PDSA, the UK’s leading veterinary charity, are funded by gifts, many in the form of legacies—an indication that a sizeable proportion of PDSA’s supporters are on the elderly side. Now, however, the charity is turning to social media such as Flickr, a photograph-sharing website, Twitter and YouTube to broaden its supporter base and to get its pet-care messages out to as many people as possible.

“We want to engage with younger people to encourage their involvement, both as pet owners and as future supporters of the charity,” says EmmaPerkins, above, PDSA’s digital product manager. “As social media grow in popularity,we have benefited from being involvedwith them.”

Just as commercial enterprises use marketing to increase the number of people buying their goods or services, charities can use it to encourage more people and businesses to donate their time ormoney in support of a cause. Dedicated pages on Facebook managed to increase PDSA’s supporter response rate for this year’s Flora London Marathon by 24%. “We set up a Facebook page for all our runners and showed them how they could use the site to helpwith their own fundraising,” Perkins explains.

“We also use Facebook to promote ‘tools’ such as Your Right Pet, which helps people choose a pet to suit their own circumstances.” Using the tool increases people’s awareness of the charity,which in turn makes fundraising through other avenues more successful.