Nonprofits live in cyclical environments. Their fortunes are often pegged to business growth and strong stock markets, which put cash in their donors’ pockets.
When revenues are strong, it’s important to control spending and to 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.
Face the elevator door! That means being ready to capitalize on opportunity (the elevator door opening) regardless of where you are in a cycle.
By collecting and saving resources during strong financial cycles, during weaker cycles (when the elevator changes direction) 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!?