For any organisation, cash flow management is one of the most important responsibilities.  Even the Merry Men would have to go out of business if they didn’t retain enough money to restock their arrows.  If the cash does not flow at the right pace at the right time, your organisation might be out of business, too.

With a not for profit organisation which receives income from grants, it can be argued that this responsibility is even greater.  Getting the timing wrong for your cash flow can not only threaten the projects the grant relates to but, in some cases, the viability of the organisation.

Some important issues to consider with your cash flow management include:

  • Make sure it is linked to your organisational budget.  For example, if you plan to have an increase in expenditure in a particular month, perhaps due to equipment purchases, 3 payrolls in the month, remittance of GST to the taxation office or payment of a large account, ensure you have enough cash to cover these expenses.
  • If you obtain income from membership fees, subscriptions 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.  Ensure that funds from grants are not used to pay for non-grant expenditure.  When you receive funds from grants your bank account balance can look very healthy.  It’s easy to forget what those funds belong to and commit them to other expenditure.  By doing this you risk not being able to fund your contractual obligations associated with the grant.
  • 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.  Therefore, you need to track the funds and link it to the project to ensure that funds are available as needed.
  • You also need to use your cash flow to monitor and manage the unspent funds of the project to ensure you have adequate funds to complete the project.

As a director, treasurer or member of a committee of management you have significant responsibilities in the management of the organisation including the control of its cash flow.  You need to know that your funds are being managed and accounted for correctly.