It’s not uncommon for non-profits to face financial challenges. It even happens to organizations with healthy fundraising, as they can’t always know if the money is going to arrive when it’s needed. Better cash flow management can help improve your organizations financial stability no matter your situation.
Start With Visibility
While financial statements — such as statements of activities and financial position — are important snapshots of a non-profit’s overall financial health, the statement of cash flows provides critical information on your current liquidity and potential cash crunches. It shows the sources of cash inflows (for example, donations, grants, and program fees) and outflows (including wages, rent, utilities, and program-specific expenses). In addition, it reports the net change, broken down by operating, investing, and financing activities.
Your non-profit should also make cash flow projections. It’s wise to perform rolling 12-month projections of inflows and outflows. As each month of the year ends, add another month to the end of the forecast. For example, when June 2026 ends, add June 2027.
Use the realistic expected timing of cash flows rather than simply dividing annual budgeted amounts by 12. Otherwise, you may miss looming cash shortages in months when actual outflows are higher or inflows are lower than expected. Also consider restrictions on funds, including government grants with strict compliance requirements, corporate sponsorships designated for specific initiatives, and donor-restricted gifts.
Build More Predictable Revenue
Recurring revenue (for example, annual memberships and subscriptions) provides valuable peace of mind and can facilitate better planning. To boost such revenue, allow one-time payments to be broken into monthly amounts.
Annual contributions can also be paid in installments, which may lead to funding increases. Some organizations have successfully raised donations by asking donors to “drop a zero” on their intended one-time donation amount and give that smaller amount every month. For example, a donor who planned to give $5,000 at the end of the year would provide $500 every month, for an annual total of $6,000.
Reduce Cash Outflows
Contracts aren’t always set in stone, and you shouldn’t assume you’re getting the best deal from your vendors and suppliers. When times are tight — and even when they’re not — it can pay off to ask vendors if they’re open to changing your arrangement. Pricing shouldn’t be the only focus. If they won’t budge on price, they might agree to longer payment terms, fixed fees, or a volume discount for consolidating multiple services with a single provider.
Do your homework first, though. If you can find other vendors that offer more favorable pricing, you can negotiate from a stronger position. You’ll also likely have the upper hand if you attempt to negotiate as your contract or lease ends.
Add Revenue Streams
Non-profits that are overly reliant on a specific revenue source can find themselves scrambling if that source unexpectedly dries up. You might lose a large grant, economic factors could depress individual donations, or government funding might be reduced or eliminated. If you have additional revenue streams, you can lessen the disruption to your cash flow while you search for ways to fill the gap.
Service fees or product sales are one option that can generate additional revenue. You might, for example, charge a fee for services you already provide. If you offer tutoring for low-income students, you might want to charge students who aren’t economically disadvantaged for the same service. You could also provide fee-based lectures or seminars related to your mission. But beware of potential unrelated business income tax consequences.
A Year-Round Priority
Strong cash flow doesn’t happen by accident. It requires regular monitoring, realistic forecasting, and a willingness to adapt as conditions change. Contact us for help improving your non-profit’s cash flow management.
