Strengthening Financial Stability: Strategies to Improve Nonprofit Cash Flow

SPECIAL NOTE: Jeff is posting this blog on behalf of its author: Leslie Anderson.

With continued high inflation, we regularly talk to nonprofits struggling to meet budget, retain qualified staff, and make critical investments in their infrastructure.

One strategy every nonprofit should leverage during these times is better cash flow management. Understanding your nonprofit organization’s sources and uses of cash can be helpful for understanding your organization and enabling a plan for organizational longevity.

Here are some ways to improve your nonprofit’s cash flow management:

Monitor cash flow regularly

Keep track of your cash inflows and outflows on a regular basis to identify potential issues early on.

Pro tip: Implementing a weekly flash report that tracks high-level revenue, payroll, and operational spend is a quick way to monitor cash.

Proactively manage expenses

Look for ways to reduce expenses and manage costs to improve your cash flow. An expense audit of departmental spending, such as IT or facilities, can identify costs no longer considered mission critical.

Develop a cash flow forecast

Forecasting your cash flow can help you better manage your finances and avoid cash shortages or opportunities to invest.

Diversify revenue streams

Explore new revenue streams to reduce your reliance on any one source of funding. Grant funding, sponsorships, and tax credits can be great funding opportunities for nonprofits.

Build up reserves

Set aside funds to build up your reserves and prepare for unexpected events. The annual budget process is a good place to intentionally grow reserves at a rate that effectively supports your nonprofit.

Consider using these techniques to better understand your business cycle and strengthen your decision-making processes. With a clear understanding of cash position, nonprofits can make informed decisions about how to allocate resources and respond to unexpected events.

How we can help

Through proactive cash flow management, your organization can improve financial management, make proactive decisions, demonstrate financial stability to stakeholders, and support your mission for years to come.

CLA can help you unlock financial stability through cash flow management by providing guidance on forecasting, expense management, revenue diversification, and reserve building.