Charity Toolkit 6 - How To Manage Cash In A Crisis, To Avoid Bankruptcy Or Insolvency

This toolkit enables you to manage an emergency cash crisis and identifies 20 ways in which you can generate more cash, to buy you time to implement a recovery plan, and avoid insolvency or bankruptcy.

COVID19 Response Toolbox

The funding gap is huge, and cost cutting can be a race to the bottom, and often is.  Health check any aspect of your charity in 30 mins, with access to the largest resource base in the sector, including its Funding Finder database, with 100+ core funders and 250+ other free funding finders, and 50 funding lists by  Registering Now; everything is free.

COVID19 Toolbox


What it does

Which questionnaire is it in?

Survive & Thrive

How to identify and respond to emerging risks and opportunities.


Closing The Gap

How to create a financial sustainability plan (co-produced: Moore Kingston Smith).

Finance & Resources

How to create a financial sustainability plan – lite version

Finance & Resources

Secure More Funding

How to create a fundraising recovery plan.


Save Money

How to save money, without cost cutting.

Finance & Resources

Coping With Crisis

How to manage cash in a crisis.

Finance & Resources

Forecasting Income

How to get it right and stay on target.


Managing Cash Risk

Any organisation needs a minimum level of cash to enable it to keep operating.  If you fall below this, you will become insolvent, even if you have a viable recovery plan.  To ensure your charity does not, you need to have:

·       A credible recovery plan. Funders may not provide funding, unless they can be reasonably sure that you will be sustainable.  Use the toolkits above to:

o   Assess your financial situation to reassure funders that you are managing this and;

o   Create your fundraising recovery plan. 

·       An understanding of how much cash you need each month, taking into account spikes within each month, such as rent and staff payroll.  

·       A forecast of how long you will be able to fund your charity, based on current cash and expected costs and income.  The forecasting toolkit will help you to do that. 

·       An action to plan that will ensure you always have a reasonable expectation of having adequate cash to pay your bills, as these fall due. 

How To Do That

Securing income is understandably at the forefront of everyone’s minds, but competition is fierce and, unless you're very fortunate, it takes time.  Here are a range of ways to buy the time you need. 

Secure Additional Cash

Overdraft - talk to your bank about the scope for an overdraft.

Loans - consider what options there might be to take out a short-term loan.  The COVID19 funder database lists a range of organisations that are making low cost/no interest funding available.  Select ‘Loans’ in Category to create and export a list of providers.

Secure New Income

COVID19 Funding – many of the emergency funders have simplified application procedures and short turnaround times.  The Charity Excellence Funding Finder database holds all the latest emergency funders, plus 100+ core funders, with links to 100s of other free funding databases and funder lists and is completely free.  

Current Funding – many funders have agreed to be very flexible around grants, including some making advance payments and repurposing funds. Check what they’ve said on their website and speak to them about what could be done to help you. 

New Funding – submitting new funding bids is uncertain and it takes time to bring in funding. Creating new income streams, usually involves investment, takes time and has a degree of risk. You need to have a recovery plan in place, but new funding is unlikely to be a quick fix.  Approaching those who already fund you and are both engaged in your work and have confidence in you, is likely to be the quickest and, probably, best method.

Using Digital – offers short-notice opportunities that don’t have to be time consuming or complicated to set up. Here are free resources to help improve digital at short notice and the top 10 virtual fundraising event ideas.

Claim Everything You’re Entitled To

·        Tax Reliefs - each year we fail to claim £600m in Gift Aid and that's only one tax relief. There are different types of Gift Aid, lots of other charitable tax reliefs and you can claim up to 4 years retrospectively.  That makes it complex, but that's £ billions in core funding we just need to claim.  

·        Select 'Tax Reliefs' in the Query system and the CEF will generate a report that’ll identify any you should be claiming, with links to the guidance you need to claim everything you’re entitled to.

If you’ve not joined us yet, register now.  Everything’s free, but if you really don’t want to, click either link above to find out what’s available and how to claim it. 

·        COVID Tax Reliefs

·        Business Ratesthere is COVID19 relief for organisations involved in retail, leisure, hospitality and nursery.  For those in England, the Charity Tax Group has published a very helpful guide.

·        Gift Aid Small Donations Scheme – following action by the Charity Tax Group, HMRC has announced that it will accept multiple cash donations of £30 or under that have been saved up during the crisis. 

Statutory Sick Pay (SSP) – if you have staff on SSP, check to see if you’re entitled to reclaim this.


Reduce Cash Outflow

Make Savings – Toolkit 6: how to save money without cost cutting identifies 20+ areas in which it is possible to make savings, without damaging your work. 

Don't spend money, if you don't have to.  The CEF contains links to 200+ organisations that provide charities with free goods and services.  Everything from consultancy, legal, HR and property advice to software, free websites, design services, food and furniture.  It identifies relevant ones for you, in the Help area of each assessment statement, as you score questionnaires.  You can find some on the Free Goods & Services page.  

Paying Bills – the standard payment period for bills is 28 days.

·       If you’re paying these more quickly, set up a simple diary system and pay invoices when you have to, not when you receive these.

·       Some suppliers demand payment in 14, or even 7 days, but you can be sure they don’t pay their bills that quickly.  Unless you absolutely have to, advise them you will pay in 28 days, or find yourself a new supplier. The exception to this is sole traders/freelancers for whom you invoice may be next week’s shopping.

If you are temporarily unable to pay invoices, talk to your suppliers and try to negotiate a ‘payment holiday’.   

Large Annual Bills

If you pay bills annually or quarterly, such as insurance, and any are due soon, consider switching to monthly payments.

Staff Costs

·       If you’re considering redundancy, be aware of the consultation requirements, that there will be redundancy costs and the impact this will have on both delivery and morale. 

·       An alternative is salary reductions, but rather than invite (usually senior) staff to consider this, it’d be better for them to think about donating a portion of their salary, as you can at least claim Gift Aid on this.    

If there are staff who would value more time off and can afford to do so, temporary part-time working, unpaid leave and/or sabbaticals may be on option to explore. 


Increase Cash Inflow

Income Invoices – some organisations, particularly the public sector, don’t pay invoices within 28 days and you definitely won’t get paid until you send an invoice. Ensure that:

  • Income invoices are raised as soon as the work is complete.
  • Any outstanding income invoices are hastened monthly and, if not paid, hastened more robustly and by increasingly senior staff.

Debt (Invoice) Factoring – I’m not a fan, but it might be an alternative, if you can’t get a  bank overdraft.   When you raise an invoice, a Debt Factoring provider will chase payment on your behalf.  You’ll be given the majority of the invoice value, from the point of raising the invoice.  It can help cash flow, but comes at a price. 

Turns Assets Into Cash

Deposit/Savings Accounts - any near cash assets that could be converted to cash, such as deposit accounts.  Some deposit accounts require a notice period, or may have withdrawal penalties.

Equities - in light of the market falls, don't liquidate any equities unless you absolutely have to. That could be a potentially very expensive, as it would crystallise the loss.

Defer Payments

Defined Benefit Pension Schemes – the Pensions Regulator has said that suspending pension contributions might be appropriate in some circumstances, but should be for no longer than an initial 3 months. 

Salaries – staff may be willing to defer part of their salaries; usually the senior team.  Be aware that, if they do and the charity becomes insolvent, they are unlikely to be paid much of what they are entitled to.

Loans –  you could speak to your lender about delaying the capital repayments on any existing loans, such as a mortgage.


I always believe that being honest with people is best, but be mindful around the impact of language. Discussing worst case scenarios, cost reduction, contingency planning and solvency tests can really scare people, particularly if they only have partial information and take it out of context.

Keep the messages, honest, in context and understandable for everyone. And care for yourself. Here's a CEF resource with 12 ideas to help you maintain your resilience.

·        But Be Positive. We have fantastic people - you're one of them. Don't sell yourself short.


Things To Be Mindful Of

Insolvency Risks

·        I assume that regulatory authorities will be sympathetic, but, if you do not have a reasonable expectation of being able to pay your bills, as these fall due, you must advise the Board immediately.

·        Warning Indicators - to think about: income streams are uncertain, or may be substantially impacted by coronavirus, limited cash at bank and few assets that can easily be liquidated, heavy dependence on a single income stream that may be at risk, multi-year funding due to end soon, with no replacement funding yet in place, spending restricted income on core costs or unplanned spending of reserves, free reserves well below target, or no free reserves.

·        The Risks - In law, there are potentially serious personal risks to trustees who continue to 'wrongfully trade', whilst insolvent.

·        There have been recent changes to insolvency law, including temporarily suspending wrongful trading provisions. That's very good news, as wrongful trading can have serious personal implications for trustees.  They've more than enough to worry about, as it is.  You can find advice  on options, if you need them, here.

·        On 26 June, the Charity Commission issued new guidance on insolvency, in light of the above changes to the law.

Serious Incident Reporting

·       Also be mindful of the charities obligations in respect of serious incident reporting to the Charity Commission, or OSCR or CCNI, if appropriate.   In June, the Commission issued supplementary guidance, in response to COVID19, with a table of examples.

Access All The Free Resources

The resources on this website are just a few from the huge CEF resource base, including the 8 assessment questionnaires, 7 crisis toolkits, the Funding Finder Database’s 100+ core funders, 250+ other free funder databases, and funder lists, and the 50 funder lists; everything is free. 

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