In July there was a post titled The Importance of Cash Flow Management that discussed specific issues that needed to be considered when managing the cash flow.  Follow the link for more information but let’s revisit some of the key points.

  • Make sure it is linked to your organisational budget.
  • If you obtain income, for example, from membership fees, subscriptions, enrolment fees, sponsorships or grants then your cash flow should reflect when you expect these to be received.
  • Make sure you promptly follow up any outstanding debtors and never let them get too far behind.
  • Pay your creditors on time and avoid delaying payments as this may result in a build-up of significant expenses that can drain your cash very quickly.
  • If you receive grants you have contractual obligations as to how the funds are spent so you must ensure they are used for the funded program or project and not used elsewhere.

This last point is worth elaborating on.

As a not for profit organisation you may receive funds from many different sources.  This may include general donations, tied donations, sponsorships, bequests, annual subscription, membership or enrolment fees, recurrent grants, one off grants as well as capital grants are just some examples.  In some cases this can result in a very healthy bank balance that can give the impression that there are sufficient funds to cover planned cash out flows.

Depending on the type of grant, the funds may be received in one lump sum at the start of the project or in tranches during the project.

Tomorrow we will look at a practical example of cash flow management.