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Cash is King - Why nonprofits should have reserves

Cash is King - Why nonprofits should have reserves
 
What are reserves?
 
They are funds available for use by the organization at the discretion of the board of directors (i.e. unrestricted dollars, cash). These funds are usually invested in a very conservative manner i.e. money market accounts, government bonds, etc. The investments usually have low interest rates in exchange for the ability to liquidate the investments at any time.
 
Why do nonprofits need reserves?
 
In the nonprofit world there is always the balancing act of managing the operating income and the expenses. Our current economy pushes the envelope by creating more and more funding uncertainty. Whether funding cuts are expected or unexpected reserves provide a necessary cushion for survival.
 
Reserves also allow organizations to build strong credit ratings. Similar to our personal credit scores, nonprofits build favorable financing scores for growth and expansion based on their financial statements which reflect their cash on hand, their reserves .
 
How do you build reserves?
 
Through unrestricted funds, which are usually generated by; general donations with no strings attached, foundation funds that are for the general purpose of supporting the organization and fund raising events. You can not build reserves by using restricted grant funds like government funds; federal, state, county and city. If you have unspent restricted grant funds they must be returned to the funder or a request must be made to expand the grant time line.

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2 Comments to Cash is King - Why nonprofits should have reserves:

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Stock Tips on Thursday, April 02, 2015 5:29 AM
Cash is King - Why nonprofits should have reserves title of this blog is really informative and suitable according to the blog.I am happy that I found your post while searching for informative posts. It is really informative and quality of the content is extraordinary.
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Free Stock Market Tips on Mobile on Monday, May 18, 2015 4:05 AM
This is a major task and an open thing occurs which could give lesson how to improve the cash management.
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