Today we follow on from yesterday’s post and look at an example of cash flow management.

As a volunteer treasurer you need to be very careful as often these amounts are contractually linked to specific activities or projects through a funding agreement or contract, so it is imperative you are able to link the funds and track how they will be spent.  When you have multiple grants this can be especially difficult to monitor and manage unless you are using have good accounting software such as Admin Bandit.

Here is an example.

You may have received an annual recurrent grant of $240,000 to cover the employment of staff and fund a major project.  If after 6 months or 50% of the project you have spent $180,000 yet only 25% of the project has been completed you may be facing a liquidity or even a solvency issue.  To solve this you may decide to use other cash but if that cash is linked to other project or programs all you have done is transferred the problem to the next project and have escalated the problem.

What this emphasises is that  even though you may have a healthy bank balance you still need to manage and monitor what the cash is for and what it is linked to so you can meet the obligations attached to the funds.

Furthermore, as part of your cash flow management you need to be able to monitor and manage the unspent funds of the project to ensure you have adequate funds to complete the project.

These points are intended to highlight why cash flow management is so important for not only the day to day operations but also in how you meet project and contractual obligations as well as the long term operations of your organisation.