Why the Capacity Gap in Scotland's Third Sector Makes Financial Leadership More Critical Than Ever

 9th Feb 2026

Across Scotland's third sector, charities and community organisations are under a sustained pressure. Despite this, many organisations are continuing to deliver essential support - yet recent data shows that with the growing gaps between community demand, financial resources and organisational capacity - finance professionals are placed at the heart of sustainability. 

The Sector Must Stretch to Meet Demands

Wave 11 of the Scottish Third Sector Tracker was recently released and highlights that, although service delivery has remained stable in a broad sense, more than half of the organisations interviewed reported that the limitations faced surrounding resources, skills or capacity are hindering the ability to meet their demand. It is consistently cited that organisations expressed the growing need for secure, multi-year funding, specialist skills and additional staff capacity to expand, or even maintain service levels.

Previously uncommon, the number of organisations having to make difficult strategic decisions is growing due to the capacity gap - it's no longer just about funding volumes. For charities whose core purpose is service delivery, having multi-faceted finance teams with the ability to both interpret financial pressures as well as articulate operational strategies has become essential.

Financial Pressures are Increasing

The data from Wave 11 also shows that financial pressures have not hit a stand still, they're growing.

• Around 43% report that increased Employer National Insurance Contributions (NICs) have had a moderate to significant negative impact on finances - putting many organisations into a deficit.
• Many charities are having to make cuts on staffing and access reserves in order to continue to run.
• Redundancies, pauses in recruitment and wage competitiveness issues are all linked back to financial constraints.
• Over a quarter of organisations cited funding delays as one of their highest challenges - forcing pressures on cashflow and causing services to be postponed, or even cancelled.

This trend shows that charities are increasingly operating in either deficit or near deficit conditions, meaning careful financial planning and risk assessment are imperative.

Core Competencies: Cashflow and Resilience

Recent Scottish Third Sector Tracker data confirms that roles within financial functions in charities have been developing in order to meet demands:

• In earlier tracker waves, such as Wave 10 (Spring 2025), up to 37% of organisations reported operating with a budget deficit, thus causing many organisations to have to turn to reserves or cancel planned work as a result of financial shortfall.

Due to this, it means that charities are no longer able to rely on traditional annual budgeting alone. Instead, they need to be considering forward looking financial oversight, such as; rolling cashflow forecasting and funding risk modelling.

Finance leaders are now needing to explain complex financial realities to boards and stakeholders, as well as helping to weigh out strategic decisions affecting the continuity of service, staff and long term viability.

Finance Professionals are Central to Organisational Survival

The third sector's resilience and ability to continue delivering services is closely linked to the quality of financial leadership. With resources being tight and an ever rising demand, finance staff are strategic enablers who allow organisations to navigate risk, sustainability and opportunity.

This means that finance professionals are being asked to:

• Translate funding unpredictability into actionable planning insights.
• Forecast cashflow under multiple different economic scenarios.
• Balance compliance and risk with strategy.
• Communicating financial implications early with non-finance team members.

These are all key capabilities in what differentiates between finance teams who purely keep things running as opposed to those who are prepared to adapt as best they can.

Making Finance Roles Strategic for Scotland's Third Sector

With the ongoing findings, the Scottish Third Sector Tracker has shown that despite continuously being stretched, the sector is extremely resilient. Without the implementation of structural changes (better funding, more investment in recruitment and enhanced specialist skills), organisations are at risk of being unable to meet the increasing demand in needs of essential services.

Due to this, finance professionals in Scottish charities are more vital than ever. The ability to combine strategy with technicality, adaptive planning and strong communication will continue to shape the impact of the third sector across Scotland's communities.