Nonprofits Live in a Cyclical Environment

Nonprofits live in a cyclical environment. Their fortunes are often pegged to business growth and strong stock markets, which put cash in their donors’ pockets.

When revenues are strong, control your spending and aim to build a cash reserve that can cover three to six months of operating costs. When the economic climate changes, causing a downturn in earned revenue or charitable contributions, your organization will be well-positioned to meet urgent or emerging needs. Cash is king. Raise it when you can; don’t wait until you need it. Always protect your downside.

By collecting and saving resources during strong financial cycles, during weaker cycles you can be opportunistic in obtaining facilities or assets at a discount or preparing new campaigns to launch when the giving climate improves.

  • Have you built a cash reserve covering 3-6 months?
  • What are you waiting for!?

For more thoughts about the importance of cash reserves for nonprofits, listen to this chapter from Applied Wisdom for the Nonprofit Sector.