Blog post

Business planning and budgeting for charities in 2021

Melvin Bailey

February 27, 2021

Charities have had a tough year, and many are still dealing with the aftermath of 2020.

A recent report suggests around one in ten charities could be forced to shut their doors within the next 12 months, while 75% expect the pandemic to negatively impact them within the same time.

However, with lockdown restrictions set to ease over the coming months, the road ahead is looking more hopeful, and many will be looking to plan for the activities they haven’t been able to carry out under restrictions.

But it’s still important to plan carefully and stay resilient – and a big part of that is planning and budgeting effectively.

Review your business plan

Whether your goals have changed as a result of the pandemic or you’ve simply been made more aware of the risks you might face, now is a good time to revisit your charity’s business plan.

Reviewing your business plan, with particular regard to your financial strategy, will help you to assess your current position and come up with steps to reach your targets.

For example, did your business model change substantially in the last year as a result of the pandemic? What do you expect to stay the same as lockdown restrictions ease, and what do you expect to change after spending nearly a year stuck inside your home?

Your charity might have started working from home, for example, or increased its social media efforts as part of a new marketing strategy.

According to a report by Royal Mail, 71% of British firms have changed their business models in response to COVID-19.

Some of those changes included revisiting their marketing strategy, introducing services like online chat, recruiting more employees to deal with a rise in demand, even moving to a completely online presence to cut down on rent for their premises.

If any of these sound familiar, think carefully about the ways they might affect different parts of your business plan, and update it accordingly.


An up-to-date business plan will form the basis of your budget for the year.

Based on the plans you’ve set out, ask yourself what resources you will need to carry them out, and how much those resources will cost. Then you can move on to figuring out whether you’ll have that money.

Look over your expenditure from the last financial year and use those to predict the costs you are 100% sure will come up – for example, rent and other regular outgoings.

There’s no way to guarantee an accurate figure. After all, these are only estimates. But you can get as close as possible by basing your calculations on evidence and well-informed guesses. We recommend using a spreadsheet rather than pen and paper, or even better, using cloud accounting software.

When budgeting for individual projects, remember to include both direct costs like the salaries for staff who only work on those projects or the cost of specific resources, and support costs such as the rent, bills and insurance that are needed to run the whole organisation.

You can divide up support costs using reasonable estimates – things like the amount of office space one project uses or how many employees work on it – to get a full picture.

Once you’ve reached a figure on your outgoing costs, think about the income your charity has. This could include donations and grants, as well as other sources of income like loans or amounts raised through a charity shop.

Add the numbers up – are you able to execute all the plans you have for your charity? Do the numbers match?

If the answer is ‘no’, you might need to go back to the drawing board and reassess your projects. Which ones are you set on carrying out? Work out whether there are any costs you can reduce in order to run these projects, or simply look at more sources of funding.

If you’ve got more money coming in than going out, check your charity’s cash reserves policy. You should refer to this to explain any money kept in reserve as part of your charity’s annual report.


Even if your budget balances, that doesn’t guarantee you’ll always have the resources to pay your bills when they’re due.

For example, a charity that solely relies on donations might have a strong Q1 period, but could collapse by Q3 if costs are high and donations dry up. That’s not to mention the effects of any unexpected events that could be around the corner – and after 2020, we know all about those.

That’s where a cashflow forecast comes in.

To create one, work out your income and expenditure for each month, and look at the difference between the two. Are there any low points that might cause concern, or do you have a surplus you could make use of?

It’s a good idea to monitor and update this throughout the year. You can also use scenario forecasting to create a broader picture of what might happen to your charity over that time.

It’s common practice to do this by creating three forecasts, with one based on a best-case scenario, another on the worst-case, and one that’s somewhere in between.

Accurate record-keeping will make this much easier, which is why we offer an all-in-one outsourced bookkeeping service.

Plan for emergencies

Budgeting and forecasting should help you guard against financial emergencies, but in the event of unexpected financial difficulty make sure your charity has a plan for dealing with it.

For example, any of the following could be included in your emergency plan:

  • seeking alternative sources of funding
  • starting an emergency appeal
  • taking out a loan
  • reducing spending
  • stopping or delaying activities
  • merging with another charity or closing altogether.

Above all, take professional advice first. That’s why we are here to help.

Require more information?

At Rogers Spencer, our team is ready to advise you on all things budgeting and business planning. For more information regarding Charities please feel free to contact our charity accountants on 0115 960 8412 or fill out our contact form.

Melvin Bailey Rogers spencer
Melvin Bailey

Melvin Bailey is a Chartered Certified Accountant and a Partner of Rogers Spencer and has been working with us since 1996. Melvin specialises in Accountancy Solutions, Audits, Charities and Housing Providers. Find out more about Melvin here.

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