The CFO'S Perspective

How Much Cash Should a Nonprofit Have in Reserves?

An 84-year-old resident of Longview passed away this year, leaving $750,000 of her estate to three local non-profits. Relying on these types of unexpected donations is one way to build up your organization's reserves, but you can't count on these generous gifts.

Case in point is the Anacortes-based conservation nonprofit Pacific Biodiversity Institute, which just closed its doors due to a lack of funding. Whether flush with funds or struggling to keep the lights on, there’s never enough funding for a nonprofit to accomplish every initiative it would like.

Every organization needs to determine how much it requires for Operations, in Operating Reserves, and what can be dedicated to mission-focused initiatives. The answers to these questions are, of course, “It depends.”

The variables that must be considered include seasonality, worst case scenarios, and more. The key to developing a specific answer is knowledge - knowledge of the organization’s current financial state and donation history, as well as the data that is produced from a solid budget and cash forecast.

For those organizations that struggle, a plan must be developed to raise donations and reduce expenses. If you are fortunate enough to have a surplus of reserves additional questions arise. Where do you put those reserves? How should you safely manage them? While the answers vary from nonprofit to nonprofit, there are a solid set of financial best practices to follow and ensure that these questions are answered.

Topics: Non Profit Organizations Planning Cash Flow

When & Why to Hire the Right CFO for a Non-Profit Organization

Why do we need a CFO?

The right CFO in place will optimize the returns of your organization’s activities by carefully managing all aspects of your finances.

The CFO role is strategic by nature, creating budgets, analyzing financial statements, and strategically interpreting the data. They provide an active partner to the Executive Director (ED) and bring a forward-looking and proactive stance to managing the organization’s finances.

Whether an organization begins to spiral downward or have high-speed growth, a CFO might be needed to help you respond when decisions are required in a quickly changing financial landscape.

When an Executive Director becomes burdened with too many hats, it limits opportunities.  With a CFO in place, an Executive Director can feel empowered because they have a financial executive who knows how to solve problems and run the organization financially.

The right CFO will bring clarity when you lack detailed financial analysis that is critical to making sound business decisions.

Topics: Non Profit Organizations CFO Hiring Staffing