Sometimes a Cashflow Crisis is Really a Funding Crisis : Successful Nonprofits

Sometimes a Cashflow Crisis is Really a Funding Crisis

by goldenburggroup

Sometimes a Cashflow Crisis is Really a Funding Crisis

by goldenburggroup

by goldenburggroup

Organizations that are operating at a deficit and lack the cash to meet their operating expenses likely have more than just a “cash flow crisis”. In fact, they probably have a “funding crisis.”

To determine whether your organization has a funding shortfall, analyze your financial statements carefully, including the balance sheet, profit/loss statement, and cash flow statement. If your fund balance is consistently declining or you are experiencing frequent deficits, ask yourself how your organization is surviving. Where is the cash coming from to make payroll, pay the rent, and fund ongoing program expenses?

When analyzing the financials, remember that organizations operating at a deficit might meet cash flow needs by using reserve funds or a line of credit. If not used judiciously and with appropriate transparency, these sources of cash can be exhausted without ever addressing the lack of funding. In these unfortunate situations, organizations are often eventually forced to make drastic and abrupt cuts in staffing and services.

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