PBO Advisory Group’s Consulting Chief Financial Officer Rick Dahlseid recently spoke to the Professionals Nonprofit Networking Group and provided webinar attendees critical tips regarding good cash management.
- Do you know where your cash is? If you hesitated when you read this, then it is of the upmost importance that this be addressed right away. You must always know how much cash you have, where it is, and what it is doing for you.
Your cash should be working for you. Some banks provide earnings credits that will offset banking fees. Analyze your bank charges to make sure you are maximizing you cash value at your bank(s).
You should invest your excess funds not needed for the next six months, in accordance with your investment policies.
A line of credit sweep will fund each day’s net withdrawals. This is an excellent way of optimizing your organization’s cash utilization.
- How much cash do you have? With good internal controls, systems, and processes, you can – and should – safeguard your cash.
Every month, your bank statements should be reconciled during month-end closing. And the reconciliation should be double checked by a second person.Make sure you have sufficient policies in place regarding cash controls including how you handle reserves and unplanned windfalls as well as helpful metrics.
An attitude of care and concern regarding cash starts at the top. It should be modeled by your organization’s executives and adopted by all employees.
- How much cash should you have? By utilizing a 13-week cash flow projection, you can manage and anticipate the up and down need for cash.
Your daily cash utilization – or burn rate – also helps you understand how much cash your organization should keep in reserve, including the minimum and maximum amounts. Without enough cash, you won’t be able to effectively operate so this information is vital. If a nonprofit can save just 5% of its net income, in less than 5 years it will have built a 90-day reserve.You should have an acceptance policy regarding both cash and noncash contributions. One suggestion for maximizing unexpected gifts is to set aside a certain amount of each donation to help build your reserves. Another is to not accept timeshare deeds as a donation – the hassle outweighs the benefit.
If your organization doesn’t already have an auto donation program, you should consider starting one. There are several companies that can set up and manage such a program for you, including a major company based in San Diego. All you need to do is put a link on your website and cash the checks as they come in!
For more information and cash management tips for your nonprofit, contact Rick at (858) 935-4855 or email@example.com.