Charities need to stay in business
IF your vision of charities is that they are quaintly amateurish setups run by well-intentioned volunteers, then it's time to wake up and smell the coffee.
The UK has 186,000 charities with a collective income estimated at £26bn, employing approximately 563,000 people. It's big business by any definition.
The past decade has seen dramatic changes in the way charities operate. Without losing their essential philanthropic purpose, working practices now closely parallel and sometimes even lead the commercial sector.
The top 500 charities account for 80% of voluntary activity and the largest have annual turnovers of several hundred million pounds, so they need to adopt leading-edge business methods.
Quite rightly, donors want to know that most of their money is going to good works, so charities must be committed to keeping admin costs at a minimum.
In the case of Barnardo's, 92p of every pound spent is applied to childcare work. Many mainstream businesses would struggle to match that efficiency ratio.
The government increasingly prefers to use the voluntary sector to provide services in areas such as special needs education, fostering and adoption and disability.
Charities are efficient providers and welcome this challenge. But they must make sure they charge the right price to carry out the contracts, so they do not end up out of pocket.
And, just like the business sector, the bigger, faster-growing charities must avoid the risks of over-trading and poor cash flow management.
Charities and business increasingly work together for mutual advantage. Many brands tie up with a charity - 'cause-related marketing' in the jargon - to distinguish their products from the pack.
Research by Business in the Community shows that products with charity links consistently outsell identical, similarly priced competitors.
For this reason partnerships between charities and businesses are growing fast. From Tesco to the independent financial organisation Foresters, firms are forging high-profile charity associations.
Business and charity cooperation is moving into areas of staff development, too.
Many companies second rising performers and volunteers into charities for brief attachments or project work.
Recently teams from companies Diageo, Barclays, Jaguar, Standard Life and Boots have spent days out of the office helping Barnardo's to redecorate buildings.
It saves the charity money and employers benefit because it helps to build better teams.
But big challenges and opportunities still confront charities in their never-ending search for funds. Government assistance with Gift Aid has been helpful, but more can be done since charities can only recover it at the standard rate.
It would be better if they were able to directly claim back 40% on higher-rate payers' donations rather than leave this to donors who frequently don't bother to reclaim the difference.
Andrew Nebel is the UK director of marketing and communications at Barnardo's
