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Cash Flow Webinar — Let’s Keep the Discussion Going!
The following are selections from the chat from the webinar “Cash Flow Management: A Tactical Review for Nonprofits of All Sizes,” hosted by the Nonprofit Financial Commons on May 14, 2024. Below, you’ll find our forum members working out solutions to problems they had and recommending tools to others. But this conversation’s not done! If you can answer some of the unanswered questions, or have recommendations or queries of your own, join in and keep the thread going.
Templates for calculating cash flow
Kathleen: Can you share a template for calculating flow?
Nadira: Can you share a template for calculating Cash Flow?
Wade: We will be sure to include sample templates with the resources for this webinar which will be on our website.
Dana: Hi Everyone! There’s a few resources/tools for Cash Flow currently on the Commons website here: https://nonprofitfinancials.org/resources-search/?_sf_s=Cash+flow.
Nadira: Can you also share a template for Operation Budget?
Nancy: I find operation budgets are pretty subjective based on funding, program needs and fiscal year. I don’t know there is any one “template.”
Transition from cash to accrual
Annie: If we’re trying to transition from bookkeeping using a cash basis to an accrual basis, how will this affect our cash flow statements? What if the transition occurs mid-fiscal-year?
Wade: @Annie, your cash flow projections wouldn’t be impacted by a switch from cash to accrual basis of accounting.
Michelle: Would you record a reimbursement invoice at the end of the reporting period or when you receive the payment?
Wade: @Michelle, if you are on the accrual basis of accounting you would need to record the revenue at the end of the reporting period hence the mismatch with cash flow!
JaLynne: I’ve found that it’s better to prepare the cash flow projections on cash basis rather than accrual, since accrual is misleading from a cash perspective.
Leslie: When one has a budget that is accrual basis and then having to convert to cash basis there is a huge amount of time invested. Any suggestions?
Susan: @Leslie, it’s line by line if the amounts are extremely variable, for small amounts, where the differences don’t have an impact (a bill that fluctuates by small amounts month to month), you can divide the annual total by 12.
Leslie: I use a row called “tie out to bank stmt / timing differences” and just recognize that that’s going to catch some stuff.
Waiting for reimbursement in the US
Sophia: Speaking in my own experience here in the state of Mississippi, in particular with a lot of state-funded reimbursable grants, those grantors can often have internal issues in which results in an extreme delay in payments. Once this happens, it can be quite challenging, luckily my employer has reserves and a diverse funding structure that helps the organization not be so dependent on the state grants.
Tanya: @Sophia, I’m in Illinois and we have the same issues. Some of our state-funded reimbursement grants lag 6 months behind reimbursement request.
Juliann: ++ Sofia and Tanya. Same here. 2-4 months for reimbursement.
Cash released from restriction
Alison: Can you give us an example of what would be considered cash released from restriction?
Melissa: Funds released from restriction example: grant received for a specific program; funds no longer needed and the grantor agrees to release the restriction. This is a silver lining scenario. Many times, you have to return the funds.
Adam: @Alison — an example might be a restricted grant. In a given month, when you spend $100 you also release $100 from your restricted net assets.
Sophia: I have worked for organizations in the past in which certain grants were instantly classified as restrictions. In particular, i can recall one grant for a particular art exhibit. While the organization received the funds up from, they were placed in the restricted account. Once actual expenses for that particular restricted grant were incurred and paid, they were documented and each month I would transfer the amount to the operating account.
Using Excel and QuickBooks
Michelle: What accounting software do you recommend?
Holly: Pleasantly surprised with move to QuickBooks online. It has a general Cash Flow planner. It is not too detailed, but it is quick.
Adam: I agree about Excel for cash flow projections!
Nancy: I agree I use Excel as well despite all the things QuickBooks offers
Monica: I agree. I have looked and looked for better tools. I keep coming back to my Excel cash flow spreadsheet.
Mary Ellen: Agreed — Excel is the best, most flexible tool!!
Barbara: We use Excel for cash flow as well, but it is a very manual process.
Sophia: I use Excel as well, I absolutely enjoy the scenarios inputs and flexibility
Juliann: I’m oddly relieved, since we use Excel. I just thought/hoped there would be something more automated.
What’s your budget?
Jamie: I thought your budget was your total annual expenses, not revenue. Is that true?
Collette: Please confirm if budget is based on revenue or expenses.
Holly: We include both Revenue and Expenses in budget and cash flow.
Wade: @Jamie, typically it is your total expenses, but there’s a lot of variation out there around how folks interpret the definition. Always good to be on the same page!
Jamie: Thanks, Wade!
Finding a finance person from outside the organization
Jamie: My organization is experiencing a cycle where our cash flow is so tight that the org doesn’t want to engage a full-time finance person, but we need a finance person in order to perform the necessary finance functions professionally and accurately. Any advice on how to make the case to my board?
Nora: @Jamie — the same thing goes for hiring a development person.
Mackenzie: @Jamie, you may want to hire a bookkeeping team. Mine works with one called Your Part-Time Controller (YPTC) and they do a great job.
Sophia: I would say finance is the foundation of the organization. I often tell people I am back-office support with front office impact. There has to be someone, if not a team, to be able to handle the finance tasks.
Domna: @Jamie, how about utilizing an organization like Your Part Time Controller that you can utilize as needed, rather than a fulltime hire?
Jamie: They are awesome, but were too expensive for us. Thanks!!
Ruth: @Jamie yes, outsourcing is probably the right solution. And then you also get the advice and counsel you need beyond services
Jessica: @jamie there are other outsourcing options that are more affordable
Liz: I’m a consultant at Arts FMS – we offer Financial Management Outsourcing primarily for arts organizations, but this could be a solution for your organization. Feel free to reach out to us to discuss if it’s the right fit for our organization!
Susan: @Jamie we also provide outsourced bookkeeping here at 501commons.org; we might be an option.
Grant award letters
Annie: Is a grant award letter ever treated like an asset that one can use to apply for a line of credit?
Ruth: @annie in my experience, that can work
Unanswered Queries
Maynard: Are nonprofits anything like residential cooperatives in financing?
HarSimran: Are there any special cash flow and other financial considerations for religious nonprofits?
Melissa: Is there a different way to track cash flow with a pledge-heavy nonprofit?
Leslie: How do you handle it if you have a sweep going to a savings account and your checking account is pegged to a certain balance?
Bela: Has anyone ever modeled a cash conversion cycle for specific grants or types of financial support?
Tanya: Does anyone else deal with grantors who do not like to see a large amount of reserves?
Alexa: Can you share more insights on handling restricted funds as part of cash flow projections?
Maynard: Do cities, counties, and stats require BUILDING UPGRADES that they mandate (seemingly arbitrarily) for NON-not-for-profit organizations, and do they offer funding for mandated expenses that do NOT contribute to nonprofits ‘operating budgets’?
Parting Thoughts
Juliann: THANK YOU!!! I need to do Board training on this — and we need FUNDERS to understand why we need unrestricted general operating funds.
Gebrina: Government is pretty bad overall. I have an education-based client owed $1.5M since 2022.
Melissa: It becomes a full-time job to manage a reimbursable grant no matter the grantor.
Juliann: That’s brutal, Gebrina. That could end an NPO.
Kelsey: We have a government grant that still has not paid out for this fiscal year starting back in July 2023. We just received the close-out check for last fiscal year last month.
Susan: Shame on those funders for being so slow to pay!
Sophia: Outside of the stress of waiting for the reimbursable grants after being delayed, the hard part for me in particular was going back to our financial policies to see at what point can I write the grant off as an uncollectible amount. There was one grant that directly went against the financial policies as it was about 2 years, and finally all the key staff members involved agreed that needed to be deemed as uncollectible.
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