Not-for-profits have to walk a delicate line even in the best financial situation. Now with more financial strain on organizations as a result of COVID-19, executive directors, boards and leadership teams need to not only focus on income streams and reducing costs, but they need to concentrate on the balance sheet to optimize cash and maintain liquidity. It’s imperative to keep an eye on your cash flow, regularly monitor your cash position and develop some survival strategies to get you through the crisis.
Developing a Cash Flow Management Strategy
Instituting an effective cash flow management strategy may be the most important action you can take to navigate through these challenging times. Below are some useful tips to control cash:
Actively Manage Receivables
The typical 30 or 45-day account review probably won’t cut it anymore. Now is the time to shorten collection times and improve your collection process. You may also want to closely review your grantors/donors, identifying those that absorb cash from the organization.
Review Accounts Payable More Closely
While you don’t want to hurt your credit or supplier relationships, speak to your suppliers about ways to assist in managing your payments and shipments.
Thank Your Donors
Saying thank you is one of the most important ways to make sure your organization survives. A simple thank you card, maybe handwritten from an employee or someone helped by their donation, can mean the world to a donor. That thank you card might just result in another donation.
Adjust Staffing Levels
Look at needs and utilize resources to right-size your staff. There are currently opportunities for loans and additional monies for unemployment that could help and still provide for your staff.
Review All Costs
Determine which costs might be eliminated, reduced or renegotiated.
Review All Agreements
Look at current and upcoming commitments, and determine if some could be restructured, delayed or cancelled.
Review Plans for Capital Investments
Determine which capital projects can be delayed, eliminated or modified.
Establish a Deeper Relationship with Your Banker
Make sure to discuss your cash flow and liquidity positions with your banker. Pay attention to any debt covenants.
Prepare a Cash Flow Forecast
If don’t already have a cash flow forecast, now is the time to start. Begin with a simple 13-week projection containing your major cash inflows and outflows each week. This will allow you to understand periods of cash difficulty and provide you with time to maneuver. But after you have prepared the 13-week forecast, make sure you forecast out the next 12 months. For not-for-profits, many funding streams only happen once a year. You need to be able to determine if you can make until the next large influx of cash.
The tips outlined above are very important in the current environment. Liquidity and cash flow are always critical to an organization’s continuity. While it is an old cliché, cash is king today. Every organization should evaluate short-term cash flow and financing needs. This will provide you with the information needed to make the difficult decisions ahead with greater confidence. Cash flow planning done today will allow not-for profits to see the bigger picture of the COVID-19 impact on the organization and the length of time it will take to recover.
The Anders Not-for-Profit Group can help your organization identify opportunities to increase cash flow or handle the financials for you with outsourced accounting. Contact an Anders advisor below to learn more or visit our COVID-19 Resource Center for more insights.All Insights