Charities are facing greater financial pressures than ever as the coalition government's spending squeeze starts to bite and they are being warned that they need to plan for every eventuality.

The warning from Geoff Brooke-Taylor, a partner in the Company Commercial department of Coventry and Warwickshire law firm Alsters Kelley, follows the takeover by Coventry Mind of Rugby Mind, in response to tightening budgets and a need to cut overheads.

Alsters Kelley completed the deal on behalf of the leading UK mental health charity, which helps people take control of their mental health by providing high-quality information and advice, and campaigning to promote and protect good mental health for everyone.

"These are difficult days for the whole voluntary sector," said Mr Brooke-Taylor. "It is going to find itself challenged more than ever.

"On the one hand, income will be under severe pressure as people have less disposable cash in their pockets. On the other, local authorities that contribute to running costs will be looking to economise and if there is no statutory requirement to support a charity's chosen activities, they may well consider withdrawing that support.

"Even those charities which contract with local authorities to provide certain services will come under pressure as councils seek to extract the most advantageous deal for themselves.

"Flexibility will be the key for the whole not-for-profit sector. They should be looking at likely cashflows and working out the implications of a number of different scenarios. In many ways, the exercise is similar to those that businesses in the private sector should be carrying out.

"Charities will find themselves being asked to contribute more to society in the coming years but they can only be in a position to help if they survive the immediate challenges they face."

For more information about Alsters Kelley, please visit their website here: www.alsterskelley.com