The latest report from the Scottish Council for Voluntary Organisations (SCVO) reveals a worrying financial trend: in 2023, 45% of Scottish charities spent more than they generated. This is a stark increase in financial strain, with reserves falling from £5.2bn in 2021 to just £3.7bn in 2023. Unfortunately, these figures are increasing year on year.
With tight margins and rising deficits, many charities are dipping into reserves unsustainably while trying to secure new funding streams. But what happens when reserves run dry? For many, the uncomfortable reality is that they will be forced to cut services—or even close entirely.
The Root of the Problem: A Perfect Storm of Pressures
This financial squeeze is not happening in isolation. Charities are facing:
- Increased demand for services, particularly as cost-of-living pressures persist.
- Flatlining or declining income from donations, grants, and government funding.
- Rising operational costs, including energy bills, wages, and digital infrastructure.
These pressures create an environment where organisations are stuck in a cycle of firefighting—covering immediate needs while struggling to plan for long-term sustainability.
Beyond Survival: Finding Sustainable Solutions
Rather than simply seeking more funding, charities must explore smarter ways to increase ROI on the income they generate. Cutting services should be the last resort. Instead, charities should look at reducing operational inefficiencies, particularly in areas like donation processing, event bookings, and digital fundraising platforms.
Here are three key areas to focus on:
Reduce the Cost of Fundraising Technology
Many charities unknowingly lose a significant percentage of donations due to high processing fees, third-party platform costs, and inefficient payment structures. Reviewing these costs and switching to solutions that minimise platform fees and optimise Gift Aid claims can immediately boost net income.
Automate and Streamline Administration
Admin-heavy processes can quietly drain staff time and resources, especially around event bookings, donation processing, and manual data entry. By leveraging automation tools, charities can reduce the manual workload and allow teams to focus on high-value engagement and donor stewardship.
Align Growth Strategies with Sustainability
Too often, fundraising is approached with a “more, more, more” mindset—more events, more asks, more campaigns. But is that sustainable? Charities need to rethink growth strategies to focus on long-term donor retention, digital engagement, and maximising existing supporters rather than constantly chasing new acquisitions at a high cost.
The Path Forward
If nearly half of Scottish charities are spending more than they bring in, then the sector needs a strategic shift. Rather than cutting services or hoping for an influx of new funding, charities should be asking:
How can we operate more efficiently?
How can we make the most of every pound we raise?
At Dreamscape, we’ve explored these challenges in depth, helping charities optimise their digital fundraising and operational efficiency. If you’re looking for insights on navigating these financial pressures, here are some useful reads:
📌 Solving ‘The Big Squeeze’ for Charities → Read here
📌How Sustainable is More, More, More? → Read here
📌The Big Squeeze Tightens → Read here
📌How Much Do Fundraising Events Really Cost You? → Read here
Alternatively, if you're ready to maximise your return and reduce overheads, contact us to see how we can help.
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