Of the 171,000 charities operating across the UK in 2026, you’d be hard-pressed to find one not straining to reconcile dwindling charitable giving against rising operational costs.
Outputs continue to climb as wages grow and inflation edges higher, yet income remains uncertain in the face of swelling demand for services, which shows no sign of abating. This means both people and businesses have less to spare, so they are giving less money to good causes, with disposable household income having dropped for the first time in almost two years in 2025, according to official figures.
That’s not to say that we are intentionally less generous - but people and businesses alike, with rising costs, are under the same heavy pressure that charities are also struggling to shrug off. Indeed, the proportion of British people making charitable donations dropped to just 50% last year - the lowest level since the Charity Aid Foundation’s annual survey began in 2016. Charities are also facing increased competition for grant income.
For charities, this creates a specific type of tension. Services themselves are under pressure to expand, just as the pool of donors ebbs ever smaller - all while costs grow in tandem. In this context, cutting costs is an entirely valid knee-jerk reaction, but one that inherently carries very real risks. How can charities quietly accrue savings without irreparably undermining their frontline delivery or eroding morale?
In this case, the challenge is not instinctively slashing costs, but showing restraint while uncovering where sensible, strategic and targeted savings can be made.
With finite finances and ever-growing demand, every pound and penny must be scrutinised. With a task this impactful, it pays to go back to basics and ask a simple question: Which activities directly contribute to achieving your mission impact?
This exercise often reveals that some expenditure has drifted away from its original purpose. Not all spending is proportionate or still pulls its weight in 2026. Legacy systems or processes that made sense at the time can quickly become inefficient and drift from being a cost-saver to a margin-eroding liability.
One example of this is CMS or donor databases that were implemented years ago, which may have worked initially, but have needed to be layered with various workarounds to function. This is a great example of looking beyond your frontline services, which are often considered among the easiest of places to make a cut, to hone in on the real labour-draining resources that are costing you time and money.
Finance teams, therefore, need to do the digging and sound the alarm on overspend - by presenting costs in a way that clearly links spend to outcomes, ensuring that trustees and senior leaders see exactly where savings will be the most impactful. Known as quantitative impact reporting, it’s not enough to report the numbers; we have to consider the narrative around why they matter and cut those activities or products that have the least impact.
It’s easy to treat more entrenched costs as immovable, but just because something is longstanding, it doesn’t mean it is etched in stone. Property, energy, IT and supplier contracts may seem like entirely unavoidable overheads, but they are all variables that you can opt to improve.
Charities can reassess the space that they use and, if needed, renegotiate leases. Is the space you use now all required? It’s doubtful when you consider that over half (58%) of UK businesses have restructured or reduced their space in the years following the pandemic, according to a 2024 report by the British Council for Offices. There are many different options now with co-working shared spaces readily available.
Similarly, energy contracts can be revisited, with even a modest investment in efficiency often delivering quick returns. Also, it cannot be stressed enough that IT systems need to be regularly vetted to ensure that they meet your needs in an efficient way and aren’t simply being propped up by outdated infrastructure. After all, 94% of senior managers assert that legacy IT systems are a liability that can significantly reduce business agility, according to a 2024 report from NTT DATA.
It might sound cliched, but it’s the hallmark of any hardened labourer worth their salt, and it certainly applies in this context.
One of the most inherently damaging patterns we see in charitable finance circles is fiscal panic, making hasty cost-cutting decisions driven by immediate cash pressures. Decisions made under this kind of strain are often ill-advised and expensive to reverse (and they often are reversed).
More robust forecasting, complemented by varied scenario planning, can radically change this dynamic. By taking the time to model different income and cost scenarios, charities can identify pressure points before they crop up - allowing them to respond in a more measured way, before they bite your bottom line.
Importantly, this approach also demonstrates to stakeholders that your financial decisions are firmly grounded in evidence and foresight, rather than urgency.
If you’re overwhelmed by the ceaseless spread of AI, you’re not alone in your fatigue. Despite nine out of 10 organisations adopting AI use to expedite deliverables (according to a 2025 McKinsey Global Survey), leaders are actually growing more cautious as AI use grows at scale.
Rather than accepting AI’s increased prevalence and improved functionality over time, business leaders are ever more reluctant to embrace it, according to a 2025 survey by Gallagher. Trust is actually eroding, with 14% fewer seeing AI as a viable opportunity (68%), as leaders are instead viewing it as a risk that needs to be carefully managed.
However, let’s not tar this tech with the same broad brushstrokes. There is a legitimate business case for the use of AI in many cases. Automation and AI tools can effectively slash manual processing time, improve data quality and free up team members’ time for higher-value work.
This may include streamlining routine finance tasks, sharpening forecasting or supporting fundraising and reporting activities. The aim here is not to replace people, of course, but to allow skilled teams to focus on their efforts, improve insights at speed and expedite service delivery.
Beyond financial systems and technology, trustees should also revisit delivery models and long-term viability. Could elements of your service move online or elsewhere to reduce travel costs? Is there scope to broaden volunteer involvement, with appropriate training and oversight? And, when launching new initiatives, build scalability into the design from the outset. If an activity cannot be sustained efficiently over time, it may not be the right investment.
In challenging climates, charities must be both prudent and purposeful. Cutting costs is never a comfortable decision, nor a task that leaders should take lightly. However, charities wishing to strengthen long-term resilience must take action now to embed more impactful and efficient strategies in the years ahead, especially if charitable giving continues to decline.
Duncan & Toplis provides accounting services specifically designed to support charities, including budget forecasting, cash flow management and VAT compliance. Please get in touch to find out more.
