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Financial Planning in Uncertain Times

While you can never anticipate an unexpected crisis, you can prepare by having a clear view on the financial health of your organization.

This page is designed to help you analyze the financial position of your organization. Your nonprofit organization may falls into one of three categories:

  1. Able to maintain operations as an essential service. May be experiencing new or rising needs.  Can perform on grants and contracts and may be able to solicit emergency funds.
  2. Able to maintain some programs or services but cannot return to normal operations for the time being.
  3. Unable to carry out the mission or generate revenue due to current circumstances.

Assessing Financial Health & Viability

Before you apply for government programs, appeal to your funders and donors, or brief your board, you'll want to answers these questions:

  • What are your fixed expenses, minimum variable costs, and current accounts payable?
  • How much unrestricted cash do you have on hand?
  • How many months of expenses can be covered by the cash your have? (Excluding any grants or donations where you cannot currently meet donor restrictions.)
  • What revenue can you reliably expect in the next several month, keeping in mind current circumstances?

We have outlined the process and provided you with tools and worksheets for calculating your cash position and cash flow.

Tools and Support

To help you go through this process, we have developed a Cash Position & Cash Flow Workbook. This workbook contains a basic monthly cash flow model as well as a weekly cash flow model for a quarter. There is also a tab that will calculate some helpful ratios that are good indicators of your financial health.

You can also contact us for help in using these tools or assessing your organization's financial position.

Determine your Cash Position

"Cash position" refers to the amount of cash including liquid assets (assets easily converted to cash) available to your organization.

  • Days Cash on Hand: This tells you how many days you can operate if no new cash came in. When dealing with a crisis, this is the first place to start.
    • How do you calculate days cash on hand?
    • Unrestricted Cash + Marketable Securities (Such as a Money Market) / (Annual Operating Expenses- Annual Depreciation/365)
  • Burn Rate: This helps you understand the general rate you spend cash. In this case, the formula will help you to see how much cash you have historically spent per month. You can also adjust to look at your daily burn rate.
    • (Total Annual Expenses-Annual Depreciation)/12
    • To adjust to a daily burn rate, divide by 365

Forecasting cash-flow

After determining your cash position, create a cash-flow forecast that projects how much your organization expects to receive and pay out over the remainder of the year, or for at least three months:

  • Prepare a cash-flow projection.
    • Now is the time to start assessing in the most realistic terms the future cash you expect to receive from your customers and donors and what you expect to have to spend on program delivery and administration.
    • Use your statement of activities (also called a P&L or income statement) to guide your thought process. Go through every revenue line and expense line to assess how much you expect to spend. For accrual-based organizations, remember this is cash receipts and disbursements and not necessarily revenue and expenses.
    • You can do this by day, week, or month depending on the level of your activity.
    • Evaluate if you can collect your accounts receivable, including donation pledges, grants and contracts, and fees or other earned income payments. Assume that the rate of customers delaying payment or defaulting increases. Investigate whether you can advance payment of grants or contracts.

This process will prompt operational and strategic conversations about the future. After you have evaluated cash-flow and made decisions about applying for federal funding, consider doing a 12 month projection. Consider creating three scenarios: best case, most likely, and worst case.

If you get through the projections and decide that it might be good to consider temporary or permanent shutdown, see  “Considering Temporary Shutdown or Dissolution.”

If you get through the projections and see that you will still be a going concern in the future, but could use financial assistance to get you through, see information on the CARES Act.

Need Assistance?

Contact your accountant or audit firm for help or request assistance from 501 Commons' finance experts. Choose between a Quick Financial Consult ($25/15 minutes up to 2 hours) or we can set up a consulting project if you need more assistance.