The cost-of-living and energy crisis is the latest major headache for charities and social enterprises, with many experts now predicting that the impact could be more severe than the pandemic.

When the outlook is so serious, and you have a million other things to do, it might be tempting to put off thinking strategically about this, and simply hope that the worst projections don't come true. But - I can’t stress this enough - this is a crisis to tackle head on, because there are things you can do to navigate your organisation through the worst of it.

• Rising energy bills will push up your running costs and project costs, particularly if you have large or older, energy-inefficient premises, or run lots of energy-intensive activities - for example activities involving cooking, electrical machinery or digital equipment.​
• Inflation is forecast to hit historic levels, so the cost of pretty much anything you need will increase - fuel, food, materials needed for activities, services provided to you by businesses.
• Increasing staffing costs - rising costs will impact your staff too, making it more expensive for them to travel to work, feed their family etc. In a sector already known for low pay, this will put pressure on charities to pay staff more - Pro Bono Economics previously reported that to ensure that wages don’t fall in real terms, charities would need to increase salaries by 8.8% between 2021 and 2024.

As costs increase, the real value of existing grants and donations goes down. Again, let’s look at what Pro Bono Economics say: a grant worth £100,000 per year in 2021 will only be worth £94,000 by 2023, and a monthly direct debit of £20 in 2021 will have effectively depreciated to £17.20 by 2026. These figures are all based on inflation estimates that may already be too optimistic.

All this points towards you having to spend more to achieve the same impact - bad news, especially if you’re reliant on funders with antiquated views on how much things cost, and what they're willing to fund.

​Before deciding what action to take, you need to understand exactly how your organisation will be impacted. This will depend entirely on your circumstances and what you do.

I believe that every Board and senior management team should be meeting as a matter of urgency and going through their budget with a fine tooth comb. Involving your fundraisers in this exercise will help them to understand key issues and make a stronger case for support later.

For example:

• Plan for salary increases - particularly if you have staff on low pay, or whose salary hasn’t increased in a while, it’s likely they’ll be under financial pressure to renegotiate their salary or find a better-paid role. Affording salary increases in the current climate is difficult, but it's usually even more expensive to have to recruit and induct replacement staff.
• Understand how rising energy costs affect you - the cost cap figures and forecast percentage increases have been well-publicised, but the financial impact on the overall cost of your work depends on your typical energy bills and circumstances. As mentioned above, unfortunately organisations with older premises or energy-intensive activities will be harder hit.
• Look for where you're particularly vulnerable to cost increases - for example if your organisation uses a lot of fuel, if key supplier contracts are up for renewal soon, or if your landlord has a clause that enables them to increase your rent at certain points.
• Factor in rising service demand - this crisis will exacerbate many existing challenges, particularly for the most vulnerable people in society. For example, if you run an advice helpline or a mental health service, demand could increase significantly in the next year, further pushing up your costs.
• Include a generous year-on-year inflationary increase, particularly if you’re going to be applying for multi-year funding. Gone are the days when a token 2% annual increase for inflation will cut it - at least 10% now seems prudent, otherwise there’s every chance that a new multi-year grant will leave you unable to fully cover costs in Years 2 and 3.

Budgeting for these cost increases - both those that you have no control over, and those that you want to implement if funding allows - can be a stressful exercise. But it’s vital to look for these dangers ahead of time, as it'll put you in a better position to respond appropriately (see below).

​As with other recent crises, how well the voluntary sector can survive the storm depends on whether funders step up to the plate. I'm really hoping they will, especially if enough people ask the right questions.
 
If you’re currently in receipt of a multi-year grant, contact the funder and explore whether it's possible to renegotiate the grant amount for future years, based on the unexpected and unavoidable rise in your costs.
 
If you’re considering applying for a new grant but the funder’s criteria are very restrictive - for example if they’ve had the same blanket rule for years about how much you can include for overheads - explain how your budgeting shows that this is no longer viable for your organisation, and ask whether they can offer any flexibility given the current crisis.
 
By doing a proper re-budgeting exercise in advance, as described above, you can make a more convincing argument to funders, and portray your organisation as financially responsible. Many funders did show an admirable level of flexibility and understanding during the pandemic, and they genuinely want to help, so don't be afraid to ask these questions. To give an example that we've shared previously:

And like I always say, if a funder’s restrictions or policies put your organisation at financial risk - for example, if they won’t include a contribution towards running costs or allow you to budget for inflation - don’t be afraid to walk away if necessary.
 
Asking for help applies to other fundraising audiences too. If I were a Fundraising Manager at any organisation right now, I'd be developing some honest and carefully-worded messaging about the impact of rising costs on our work, to share at the appropriate time with regular givers, major donors and corporate partners. Of course not everyone will be in a position to increase their donation, but few will resent being asked.
 
If any of the charities that I currently donate to contacted me to request a 10% increase in my monthly direct debit, to ensure they could sustain their impact amid rising costs, I’d be doing whatever I could to help.

This crisis isn’t your fault, but there will still be things you can do to make savings, even if this only makes a modest difference in the face of rising costs. 

For example, here's some excellent advice from small charity finance expert Liz Pepler on how some charities can make savings by claiming reduced VAT on fuel and power, as well as maximising Gift Aid:

Spend some time identifying your own biggest potential saving areas and researching cost-cutting techniques - there are many excellent tips out there. For example, I’ve heard of organisations compiling energy-saving tips for staff, changing cooking techniques and recipes, and reviewing routes and providing fuel-saving tips if they do a lot of driving. Just watch out for scams or anybody trying to sell you something that sounds too good to be true. 

• As mentioned above, Pro Bono Economics have published this excellent report on the impact of rising inflation and what it means for charity Boards and leadership teams
• The think tank NPC has published a comprehensive guide on how charities can respond to the cost-of-living crisis
• Barclays has published this article for businesses on the cost-of-living crisis, with advice on things like dealing with rising fuel prices and negotiating rental contracts. 

​There's plenty to worry about at the moment - in fundraising and in society. With every passing crisis, charities and social enterprises face increasing need, but more financial pressure - and it’s no different now with rising inflation and the cost of living crisis.
 
On top of that, there’s much entrenched frustration directed at funders, whose grantmaking processes and policies add a further headache. Only last week, new research estimated that organisations spend £900million per year meeting the demands of applying to funders.

Our own blog charts this rising frustration. We've written almost enough rants to fill a small book, whether about the human cost of bad application processes, the need for funders to turn over a new leaf, the injustice of the lack of infrastructure core funding, or the general frustrating things that funders say.
 
While it feels important to be honest and realistic about these challenges, it's also nice to focus on positivity where we can find it. And it's true that the pandemic has prompted some positive reflection and reform from many progressive funders. When updating our training content recently, I really enjoyed preparing this slide highlighting some of the current movements and reports on grantmaking that give us reasons to be optimistic. I don’t think it’s a coincidence that it’s also one of our most colourful slides:

​On the right of this slide is a book that I’ve been promising to review for months, because it gives a glimpse of a possible future for grantmaking that is better for everyone - more accessible, more respectful, more even-handed, and more impactful as a result.
 
Modern Grantmaking is written by Gemma Bull and Tom Steinberg. Both have worked for funders and been responsible for giving away money - a job that many people, particularly those outside the sector, might think sounds enjoyable and straightforward, but is actually fraught with challenges.

Both have evidently experienced the creeping unease and frustration that comes with the territory of seeing money given away badly. So they sat down and spoke to countless experts about what the common issues are, and what good grantmaking should look like – and Modern Grantmaking is the result.
 
Obviously, this book isn't written for people like me who seek funding, but for those on the other side of the fence who give money away and want to do it better. But for fundraisers, there's plenty of useful insight - and reassurance - in understanding more about the issues that grantmakers are wrestling with.

The first reason for positivity is simply that a modern grantmaking movement exists. That a growing number of people in influential positions are talking and writing about how grantmaking isn’t good enough, and how it can be better.
 
Early on, the authors write that in the last decade, such ideas are “growing up like green shoots through cracks in a pavement. These shoots are now so numerous and so vigorous that the paving slabs of traditional grantmaking practice are threatening to buckle.”
 
Yet I wonder how many of these reformist ideas actually make it far beyond a tight circle of people. Certainly, the vast majority of fundraisers who come on our training courses and share frustrations about the things funders say and do, show little sense of this buckling pavement under their feet. So to have a new book that brings together these ideas, shouts about the need for reform, and signposts people towards a number of growing modern grantmaking movements, is a beacon of hope for fundraisers in a difficult landscape.
 
As well as influencing funders, this helps to legitimise the frustrations that fundraisers feel, and galvanise them to find small ways to challenge and push back. If more of us are talking the same language, change happens faster. Last week, I saw a small but significant example of this on Twitter:

​Modern Grantmaking gave me a telling glimpse into the curious career of a grantmaker - one with few structured development opportunities, and little incentive to do things differently. In the authors’ words, "grantmaking can also be an ideal career for people who just want a quiet life and a reliable salary.”

Firstly, grantmaking comes across as at best a very young profession, and arguably not a recognised profession at all. The authors explain how there's no established career path into grantmaking, very little tailored training to help with the key skills required, and no accreditations or recognised standards to measure performance against.
 
Secondly, there’s not much accountability. In a world without enough funding to go around, if a funder treats you badly, where are you supposed to take your ‘business’ instead? Can you afford to complain? If funders don’t recognise themselves as needing to provide a service to grantseekers, they won’t measure themselves in those terms.
 
Reading this, suddenly many of my past experiences with funders made sense. Seeking funding is a lot like being a UK rail passenger - you might not enjoy the experience, it might feel unpleasant and at times dehumanising, but good luck finding an alternative. Now imagine the added fear that if you complain about the delays and overcrowding, they might simply stop offering you a seat at all.​

It's cathartic to read this insight in Modern Grantmaking, and I'd recommend you do so yourself. But the best thing about the book is how it creates an alternative vision for grantmaking, as a profession with the service mentality, the standards and development opportunities, and the pressure to be better.

There's advice about how to recognise and manage the power and privilege that you have as a grantmaker. How to convince colleagues that you may not have the right perspective and lived experience in the room to evaluate funding proposals and make fair decisions. How easy it can be to strong-arm a charity into completely changing their project or budget, because of a seemingly innocuous suggestion you make.
 
There are whole chapters dedicated to improving how you treat applicants, even if nobody is demanding it. How to understand what the experience is like for grantseekers trying to navigate your website, fill in your application form and go through the agonising wait for a decision - then take steps to improve that experience.
 
A recurring theme is the importance for humility - just because you have all the money, it doesn’t mean you have all the knowledge. For grantmakers with this mindset, the book contains practical advice on how to commission independent research to understand a social issue well enough to judge funding proposals, and how to start reading evaluation reports with a critical eye that genuinely broadens your understanding, rather than just looking for quick evidence that your grants are working.

Reading all this was music to my ears as a fundraiser. And what makes Modern Grantmaking so convincing is that it’s peppered with horror stories of grantmaking done badly, and inspiring case studies showing how funders have reaped the benefits of making positive changes.

The book also has a real grassroots feel. While it may be picked up by the occasional Chief Executive of a funder, it's really written for those people whose day-to-day work has the power to make grantseeking a good or a miserable experience – the people who design application forms, respond to emails and answer the phones. Of course, we can hope that these people will still influence those working above them, and will ultimately go on to lead trusts and foundations in the future, and set a new standard for grantmaking.

​​I hope that any grantmaker wanting to genuinely maximise their social impact will read Modern Grantmaking, then do what they can to push through change. I guess that will be the ultimate measure of the book’s success.
 
But, in the meantime, if you’re a frustrated bid writer wondering if, how and when things will ever be done better, I’d also recommend getting yourself a copy - you’ll be able to take plenty of ideas and much-needed hope from it.

You can buy your copy of Modern Grantmaking, and read more about the movement and the authors, by clicking here.