| How Cash Forecasting Can Help Your Non-Profit Stay in Business

Posted in Non-Profit at 9:00 AM by Loftis Consulting


A cash forecast is the number one priority for ensuring your non-profit becomes and remains financially healthy.  Without money, you cannot pay employees and vendors and will quickly find yourself out of business and unable to execute the organization’s mission. This seems obvious but lack of cash management is the main reason why most for-profit and non-for-profit businesses fail.  To prevent your non-profit from having the same fate you should know your cash position (i.e. the cash readily available and unrestricted) by reviewing regularly actual cash inflows and outflows as well as creating a projected monthly cash forecast for at least for the current fiscal year.

Reviewing Cash Inflows and Outflows

For organizations that historically have been tight on cash on a regular basis, cash inflows and outflows should be reviewed weekly.  This will ensure that the non-profit is operating in line with revenues and contributions and decisions can be made quickly and proactively.

A weekly cash forecast projects out cash receipts for such items as uncollected billings and sales as well as cash to be used such as outstanding invoices, payroll, employee benefits and any other cash payment.  The net result by week will highlight the time periods where you may be cash poor and need to do something to fill the gap.  Options include:

◾Reaching out to funders to advance contributions sooner

◾Using loans or lines of credit to cover payroll for example until outstanding accounts receivables are paid

◾Using credit cards to pay for office supplies for very short-term cash crunch needs

◾Delaying payments on non-urgent bills

In addition to a weekly forecast, a monthly cash forecast should be completed for the entire fiscal year that is updated each month based on new information.  By having a monthly cash forecast, you will be able to foresee times where there is not enough money on hand to cover all expenses when they are due.  Even when cash is not projected to be zero but is projected to be near zero there will be a need to get access to cash.  This forecast will allow you to anticipate cash needs and put plans in place proactively such as setting up or accessing a line of credit.

A cash forecast is not only valuable in helping you plan for times when cash is low but also when there is surplus cash.  The non-profit should already have plans for times when there are excess cash such as paying down debt or investing in facilities.  The executive management team and board of directors should never be surprised about the cash position of the non-profit, good or bad.

By using these tips and implementing a cash forecasting process you can prevent the stress of not having enough cash on hand to manage your operations day-to-day.  If your non-profit does not have the personnel in-house to produce a robust cash forecasting process, a project-based non-profit Controller or CFO may be the solution to create and execute this for your organization.  Contact Loftis Consulting for additional details.



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