E-mail can certainly help to reduce administration costs, but it does carry cost implications itself. Webspace magazine this month reports that this figure can become quite high. "Anecdotally it costs a company £5 to answer an inbound e-mail which can take up to 12 minutes to understand and sort out an appropriate reply to, and up to £12 if a supervisor gets involved." While those figures are unlikely to apply to charities, it is important to consider the costs involved in answering supporters' e-mail enquiries.
If it ever gets too much one of the top-end solutions to managing large quantities of e-mail is Brightware, which uses intelligent agent software to "understand" the contents of an e-mail message and route it to the correct staff member. More information from Brightware.