I’m writing this at a time of great uncertainty. I’m in Western Washington State, the epicenter of the coronavirus outbreak in the US (our first positive test was in January).

Schools are canceled. Shelves at stores are vacant. Everyone is self-isolating. And we expect to be for weeks.

Nonprofits of all kinds are hurting right now. Arts organizations have had to cut all their events, often while still paying artist fees. Spring fundraisers have been postponed indefinitely. Will they be on the calendar in May? No one is certain now. And it’s hard to make a major gif ask when your biggest donors are self-isolating too!

Many of the ways that many nonprofits either earn more or raise money is likely to be affected. Some nonprofits here are already laying people off.

Maybe your community is not facing the same situation we are (though it’s very likely you will be soon).

Whether you’re in the thick of this crisis, or whether it still feels distant, I strongly encourage you to run a cash-flow assessment of your nonprofit. At a time of great uncertainty, seeing the numbers can give you either the courage you need to make a hard decision, or they will give you the reassurance that you can weather a storm.

I’ve got a free Excel sheet and a tutorial video to help you through it.

How to analyze your nonprofit’s cash flow

The question of cash flow can’t be answered by looking at your nonprofit’s budget, or Quickbooks, or whatever it is you’re likely currently using. This is especially true if a nonprofit uses accrual accounting, when the books move around expenses and income.

Cash flow requires you to look forward on either a weekly or monthly basis (depending on how difficult your situation is).

You can download a free Excel spreadsheet (.xlsx) that I put together to help you do this work.

If you want to watch me go through a process like this, I recorded myself doing the cash flow projections for a hypothetical nonprofits here. (You may want to watch it full screen and on HD to see the Excel spreadsheet clearly.)

Step by Step

Here’s what you’ll need:

• An hour or so of quiet time in front of a computer
• A budget, if you have one
• The last two months of bank statements from the bank (use the copies that came in the mail, or print the PDFs from the bank. It’s easier than flipping back and forth between screens).

Here’s the process:

1. Enter the amount of money you have in the bank at this very moment in the top left yellow cell. If you have reserves, add them in too. If you have an emergency fund, add that. If you have other assets that aren’t cash, don’t add them. We’re strictly interested in cash.
2. Choose the categories on the left that make the most sense to your organization.
3. Don’t count money that’s already been spent. When doing this month’s numbers, don’t include (for example) the first round of payroll early in the month. It’s been spent. It’s accounted for because you put the current bank balance at the top.
4. Have you written any big checks that haven’t been deposited yet? Make sure you do include that. Quickbooks might show that you’ve written a check, but if it’s not deposited yet, your starting balance won’t. So take a minute and think about whether there’s anything significant you need to take into account.
5. If you have a budget, you can start by putting in what is normal for three months of income and expenses. Capture “normal” for you. It will help later.
6. If you don’t have a useful budget, then just start adding income when you think it will arrive. Like: when will the cash actually be on hand? Put some in March, April, May.
7. Put in expenses when you expect them to be spend. Again: when will the money leave your bank account?
8. Look for negative numbers. The bottom lines of each month show how much money will be in your account at the end of each month, assuming your projections are correct.
9. Now, the test. Get really conservative in your income. What if the fundraiser in May has to be cancelled? What if you still contractually have to pay for certain things? What if your major gifts program stalls because donors don’t want to meet with you (self-isolating and all). What if… what if… what if…?
10. How long do you have until you end a month with a negative balance? This is the essential question. At what point do you run out of money? (Note—if it’s March or April, you should consider revising the spreadsheet so that it doesn’t show months but weeks. Figure out how much lead time you have. Knowing if it’s the first week of April or the last can make a big difference in how you can deal with).
11. Now start figuring out options for those expenses. If you still owe money on a cancelled fundraiser, will a payment plan help? What would happen if you cut everyone’s salary by 10% for three months? Is that enough? What can you defer or delay? Finally, consider furloughs or layoffs.
12. In addition to cost-savings, think about ideas for finding new money. Is there anything you can do online to earn some funds? Are there any events that could go “virtual” and earn you funds. Can you get a fundraising email out the door next week? Or an actual hard-copy appeal letter in two weeks? Are there donors who are close to you who will instinctively understand how difficult this time is for you and rise to the occasion? Can the board collectively step in to fill a short-term cash flow crunch?
13. Come up with a series of steps that get you through at least May. The virus may not be an issue in May (or it very well may be). But it’s still likely we’re still facing real economic disruption in May. If you have the space to do it, try to get through July.
14. Present the problem and your response to your treasurer and/or board president. You want someone to check your work. What if you missed something? Look at your document and the numbers in the spirit of collaboration. Be open to changes. This is what boards are for. And if there are some dramatic steps you’re making, you’ll be glad you have them engaging with the issue early.
15. After you’ve implemented the steps, repeat this regularly. Check back in a week or two. Save the document as a new file with a new name (adding the date is a good idea) and redo the exercise. Then compare how you’re doing. Did you forget about expenses? Have donations stayed stronger than you expected? The tighter cash is, the more you’ll want to revisit this process until you’re through it.

Again, if seeing a long list of bullets isn’t how you learn, watch the video. You’ll get a good sense of how I’m relating to the numbers and the information, and it may help you.

I hope this has been useful. If you want to reach out, email me and I’ll see what I can do to help as best as I can, given the situation.

Good luck!