A lecturer and author of The Zone of Insolvency underscores the importance of cash reserves. Cash flow management is among his list of essential characteristics of financially strong nonprofits. Strong discipline with cash flow includes the following:
- Weekly or daily monitoring of cash position,
- Projections of cash flow for the upcoming 12 months and a
- Board policy requiring minimum levels of cash reserves to even out seasonal fluctuations of income.
Without these projections to manage your cash reserves, your organization’s leadership is forced to focus on survival and crisis management, rather than long-term strategic planning and development or improvement of program quality. Unfortunately, limited resources beget limited resources.
To do: Make it a management priority to examine and adjust your cash flow so you can boost your organizational capacity and responsiveness to unforeseen fiscal demands.
Refer to my first post on this subject when I explain more about setting cash flow goals and acknowledging the factors that may impact cash flow.