Business Tips & Tricks with Tanya Luken CPA
Your nonprofit had a great year. Donations are strong. Grants are committed. The financial statements even show a surplus. So where did the cash go? Few things create panic faster than discovering the money you expected simply isn’t in the bank. And for nonprofits, this can happen even when the organization is financially healthy on paper.
The problem is timing. A grant may be awarded today but paid months from now. A major fundraiser might bring in significant revenue once a year, while payroll, rent, and program expenses happen every week. Restricted funds may be sitting in the bank, but they aren’t available to pay every expense. Looking only at your statement of activity at the board meeting isn’t enough. You also need to understand when cash is actually coming in and going out.
One of my favorite tools is a 13-week cash flow forecast. It looks ahead roughly three months and estimates your cash receipts and payments week by week. Start with today’s bank balance. Add the money you realistically expect to receive each week, then subtract payroll, rent, vendors, program costs, debt payments, and other expected expenses. Suddenly, you can see trouble coming before it arrives! Would you make different choices today if you see negative cash eight weeks from now? It is easier to solve it today than eight weeks from now.
Update the forecast every week with what happened and what has changed from your original assumption. It doesn’t need to be fancy. It needs to be useful. The goal isn’t simply to know how much cash you have today. It’s to understand where your cash is going tomorrow. When you can see 13 weeks ahead, you move from reacting to planning. You have time to adjust spending, follow up on receivables, communicate with funders, and make thoughtful decisions.
No surprises, less stress, and better information and more confidence to focus on your mission! By the way, this works for for-profit businesses too!
-Tanya Luken, Luken CPA PC
503-330-8515
