Liquidity and Cash Flow: How to Build and Monitor a Liquidity Plan When Cash Is Scarce
Liquidity challenges can put even the strongest nonprofits at risk. Understanding and managing cash flow in uncertain times is essential for operational stability and decision-making.
Webinar
The Extraordinary Value of Liquidity: How to Get, Guard, and Use It in 2025
All organizations need liquidity to function at their best, but nonprofits face a built-in barrier to optimal liquidity due to the tendency of their funding to restrict revenue to particular uses. This reduces flexibility and agility, even when crises occur or an opportunity presents itself. Currently, many organizations are depleting their reserves and other unrestricted funds due to the profound uncertainty they are experiencing, especially regarding government funding.
Download the slides from this webinar.
Transcription: Coming soon!
Resources
StrongNonprofits Toolkit
Among the offerings in the Wallace Foundation’s StrongNonprofits Toolkit series is a selection of resources for dealing with cash flow. You’ll find an article from the fall 2017 edition of Nonprofit Quarterly by Hilda Polanco and John Summers that covers the “whats and whens” of cash flow management for nonprofit organizations, as well as a spreadsheet template that can “help you translate your operating budget into a detailed cash flow projection, including expense details over the course of a fiscal year.
Wallace also hosts a template and guide from BDO for developing your reserve fund policy. You can download that document here.
Lastly, the Toolkit has a financial health analysis tool. This data visualization tool provides a snapshot of your nonprofit’s financial health based on four years of financial data and with a focus on liquidity. The package (linked below) includes the tool, video guidance, and some related resources.
From the Nonprofit Financial Commons
A Three-Dimensional Approach to Revenue Planning
While most nonprofits would prefer revenue that is largely reliable and renewable, having too much of it that’s dependent on too few sources is a dangerous proposition and can give a false sense of security. Still, although fund diversification has long been touted as important to the sustainability (if not rapid growth) of nonprofits, this article suggests that two other dimensions must be measured to achieve financial health over time. These are predictability (sometimes called reliability) and flexibility (sometimes understood as autonomy). As many nonprofits reimagine their future budgets, it’s important for boards and staff to use three-dimensional thinking that balances diversity, flexibility, and reliability. Read more.
Financial Risk Assessment: A 3-Level Model for Nonprofits
As many nonprofit organizations continue to navigate uncertainty, there is an immediate need for leaders to assess their risks and consider how they may respond to likely scenarios. The following risk assessment model is designed to guide nonprofit board of directors and management staff on the work they need to do to organize their financial planning over the next six months to a year. Read more.
Assessing Your Banking Relationships
- “Nonprofit Banking: 5 Things Every Nonprofit Should Know”—Donorbox Blog
- “What is a CDFI?”— Opportunity Finance Network
- “Where We Bank Matters”—Leap Ambassadors
- “How to Check Your Bank’s Financial Health”—Troy Barrow, LUTCF via LinkedIn
Strategies for Cash Management
- “Where Should My Nonprofit Keep Its Operating Cash?”—Amy Silver O’Leary, Council of Nonprofits
- “Short-Term Investments: Definition, How They Work, and Examples”—Troy Segal, Investopedia
- “What Is CDARS?”—American Deposit Management Company
- “What SIPC Protects”—SIPC
