Managing Money With Mission

Cash Needs for Your Nonprofit

nonprofit_cash_needsThere’s an interesting belief held by many nonprofit stakeholders that having the 501(c)(3) designation means the organization cannot have a “profit” at the end of the year. Running your nonprofit like this could lead to drastic money issues down the road. When it comes to cash needs for your nonprofit, it is important to remember that reserves are needed and daily cash movement might be necessary to remain viable.

The “Variables” of Cash Needs for a Nonprofit

Determining how much your organization needs for operations and operating reserves depends on many factors such as seasonality and worst-case scenarios. Finding that number for your organization requires a full understanding of your cash forecast, your budget, your donation history, and your cash reserves. You need outside eyes – someone external who is not benefiting from your organization – to help you determine how to disburse cash for different projects, programs, or basic capital needs when revenue is low.

Find Where Cash “Leaks”

When was the last time you took a step back and asked yourself if everything you do drives the mission of your nonprofit? Are there inefficiencies in your programming, development, or administration? How detrimental are they and can some of those inefficiencies be lessened? Can you purchase something one-time that could save staff hours and end recurring monthly costs? Review how cash is being spent to plug leaks in operations and improve overall cash management.

Using Cash in Reserves

If you are growing your nonprofit, your budget should be positioned to gain a profit, with that cash placed into reserves. Your board MIGHT designate reserve cash for certain programs thinking it would be beneficial for the future, but this cash is not technically restricted. If cash is needed and is available in the reserves, it can and should be used for necessities.

Day-to-day cash needs are hard to predict, but if you have help from someone who knows your financials, you can be prepared for those “variables” discussed above.

Numbers 4 Nonprofits’ accountants work with our clients when it comes day-to-day cash needs, cash management, and cash forecasting in your budget. Contact us today to find out more about how we can help you!

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