The recent collapse of retail giant Dick Smith should remind retail establishments and Non-profits alike of the importance of properly managing one’s cash flow.  As detailed in a recent article in The Sydney Morning Herald, inventories at Dick Smith have slowly been creeping up over the past two years.  This inability to properly manage their working capital and other issues with the management of their cash flows has led to a serious liquidity problem despite their past sales volume and profit.

Just as many retailers see a boost in sales during Christmas, many non-profits receive a higher volume of donations at this time.  Now that the holidays are past, a slowdown in activities and donations is a common experience for both retailers and non-profits. As a volunteer treasurer, you can help your Non-profit avoid a financial crisis during this slower season by using these tips to help your organisation better manage its cash flows.

Gain Control with Better Budgets and Forecasts

Does your organisation’s budget include forecasts for revenue and expense? Take some time to break your Non-profit’s budget down by month and quarter and match up your planned revenue and expenses.  Make an effort to avoid shortfalls in your cash flow by timing the payment of bills and other expenses to coincide with the receipt of your group’s revenues.

When planning your budget, avoid spending all of the planned revenue that your organisation expects to take in. Including a surplus in your budget plans will help to insulate your organisation if there is a sudden and unexpected drop in donations or other revenue. Having a surplus will also improve the long term standing of your group and help to ensure that it remains financially viable for a longer period of time.

Look at Both Sides of the Equation

While many organisations focus on reducing their costs in an attempt to avoid shortfalls in cash, it is important to not forget the “other side” of the equation and look for ways to increase the flow of cash and look for ways to increase your organisation’s income.  When seeking additional funds, take steps to ensure that you are properly accounting for donations and grants that might have special conditions on how they might be used, and what steps you need to take to ensure compliance and renewal for future terms.

In addition to accelerating your fundraising efforts, be open to applying for additional grants from private institutions as well as government sources. Your non-profit might also consider updating the service fees that they charge for their programs if there is considerable expense in this area that remains uncovered by your expected future cash flows.

While the failure or large businesses such as Dick Smith is worrisome,  careful planning and budgeting and effective cash flow management can help nearly every business and non-profit to be able to weather economic downturns and other unexpected events.  Try Admin Bandit software at your club or NFP and make managing your money an easier task.