We have been asked by one of our major funds that we need to start thinking of creating a funding reserve for a rainy day.
Can someone advise me how other organisations have been able to build up theri reserves ;
A good way to build up reserves is spend less than money coming in.
Works wonders – though have to be careful with restricted funding that must be spent.
A few months running costs as reserves is no more than being practical. More than 6 months reserves, some funders aren’t too keen on (two of my recent rejections were because we have too much unrestricted reserves – we hold 7 months on the last accounts),
But 6 months or under, never been rejected on reserves.
Thanks for that Martyn.
If we raise 10k for a piece of work and we deliver the work
for 8k, can the save the remainder into reserves to deliver similar work.
How do some organisation have over 100k in reserves.
Do they fund raise and keep the fund in their reserve fund or what;
We currently have over £100K in reserves.
Partly not spending much, but also covering costs with fundraising.
ie not having to spend £769 on a breathalyser ourselves because a trust gave us the money for it.
If you raise £10k restricted funding for only that bit of work, and don’t spend that much, can create problems.
I’ve asked funders in the past if we can instead use the funds for xxxxx (named and detailed project). Always said yes (well, 2 out of 2 times they said yes).
Unrestrected income is easier in that you can use any spare on whatever else including holding in reserve.
Just be careful with reserves – they can drop very quickly in any time period without much income.
These days its a good idea to check out Full Cost Recovery. Even if you don’t use it, it can give ideas.
In theory, full cost recovery means that an organisation should be able to put a budget line for “contribution to reserves” in any funding application.
In practice, most (make that nearly all) funders would rather the money was sat in their bank account than yours! Fundraising specifically for reserves is practically impossible.
Martin’s advice is, as always, sound – try to save ‘unrestricted’ funds for reserves by accessing funds for ‘everything else’. If funds are restricted and there is a significant underspend then you must be honest with the funder – many will be flexible about you re-allocating to other projects or overhead costs if you ask them very nicely.
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