As a nonprofit leader, you face unique financial pressures that can keep you up at night. While most small business owners worry about profits, you're also juggling on top of that:
- Delayed grant funding
- Potentially missing payroll deadlines
- Reimbursements that never seem to arrive on time
- How to support the people who depend on your services if money runs out
That stress hits a bit harder when your mission is at stake!
While that stress doesn’t go away overnight, getting clear visibility, via forecasting into your finances, is the first step toward peace of mind and smarter financial leadership.
Let’s take an honest look at why nonprofit leaders feel so much stress, where forecasting and budgeting can help, and the steps you can take to better manage your cash flow.
The real stress behind nonprofit cash flow problems
Not having enough available cash as a nonprofit doesn’t just mean that you don’t hit revenue goals. It means that the causes that you support go without. Here’s what’s happening:
Why nonprofit finances feel like a roller coaster
As a nonprofit, your money doesn’t just depend on your ability to market a good product or service. Nonprofits face three unique cash flow challenges:
- Unpredictable revenue timing – For nonprofits, cash flow is not just about income and expenses—it’s about timing. Grant disbursements get delayed, funding comes in seasonal waves, and pledged donations aren't the same as cash in hand. Your bank account rarely matches what your financial statements suggest you have.
- Restricted vs. unrestricted funds – While unrestricted funds (those that come with no conditions for use) can go toward expenses or activities as you wish, restricted funds come with conditions that strictly dictate how those funds can be used.
- High fixed costs – All the above simply means you might not be able to use those funds when you want to cover the high fixed costs of running a nonprofit, such as employee salaries and office rent.
These financial limitations severely increase stress levels that have a ripple effect on your organization.
How stress shows up in your operations
The financial limitations above severely increase stress levels that have a ripple effect on your organization. That anxiety can lead to:
- Poor trust with donors — Why should they give you money if you can’t prove you can manage it properly?
- Decision paralysis — If you don’t know when you’ll get additional funds, why should you spend the limited money you do have?
- Mission drift — How can you put on activities if you can’t afford to organize them?
- Compliance concerns — If you’re already struggling with financial management, who’s to say you aren’t breaking compliance laws, too?
What does strong nonprofit cash flow management look like?
The first step in easing these stressors is understanding what good cash flow management can look like.
Strong cash flow management gives you X-ray vision and should look something like this:
- Weekly tracking – You know exactly what funds are coming in and what expenses are going out each week, giving you a real-time picture of your cash balance
- Forward-looking forecasts – You use both historical patterns and current data to anticipate fundraising peaks and valleys, planning for lean times before they arrive
- Real-time dashboard clarity – You have simple, visual tools that show your financial position at a glance, helping you make quick decisions when needed
With proper visibility, you transform from reactive to proactive, addressing potential cash shortages before they become emergencies and identifying opportunities to strengthen your financial position.
Why rolling forecasts reduce cash flow stress
If you’re going to rid yourself of the poor cash flow-induced anxiety, you need to keep a constant eye on the future. Creating a rolling cash flow forecast gives you both visibility and flexibility to plan ahead.
1. Real-time adaptability
Rolling nonprofit financial forecasts let you:
- Adjust for surprise donations and plan how you’ll use those additional funds
- Pivot in the event of grant delays
- Build a contingency plan for low cash periods before they happen
- Maintain operations even during slow funding seasons
Clarity between restricted and unrestricted cash
Too many nonprofits fall into the trap of “phantom cash” – seeing money in the bank but forgetting it's restricted.
Good forecasts clearly identify and separate restricted and unrestricted funds, so you can allocate your financial resources with purpose and clarity.
The emotional benefit of financial clarity
By using nonprofit financial forecasts to foresee future challenges and build contingency plans, you can transition from sleepless nights filled with panic to excited days of confident planning. Instead of worrying about how you’ll cover mission activities or a fundraising event next month, you can relax and rely on your forecast to tell you exactly how you’ll fund things.
So, let’s get you set up with a cash flow plan that takes the weight off your shoulders!
How to get started with a nonprofit cash flow forecast
1. Understand your cash flow drivers
First, list your revenue sources. As a nonprofit, you might get revenue from:
- Grants
- Donations
- Earned income
- Fundraising events
- Programs fees
Next, determine payment timing of each of these revenue streams. Some funds, like donations and money earned from fundraising, will hit your bank account shortly after you receive them. Others will take longer—grant funding, for example, may mean you don’t see reimbursement until you meet certain conditions.
Once you know where cash is coming from and when, identify cost categories. These can include:
- Payroll
- Rent
- Program
- Admin costs
- Fundraising costs
You’ll also need to flag restricted versus unrestricted funds. Determine which funds you can pull from without rules and which have conditions.
2. Use a 13-week cash forecasting model
As the name implies, a 13-week cash flow model offers a 13-week projection of your cash position. This type of forecasting is especially powerful for nonprofits because it allows you to get a near-future view of your finances, no more than 90 days out from when you produce it.
Why does that matter? Because most nonprofit revenue hits your bank account within that time period, allowing you to account for various cash inflows and outflows and make adjustments sooner.
Tools to help you get started:
This 13-week cash flow template is a game changer!
3. Leverage your 13-week cash flow model to create a budget
Once you have an idea as to what revenue and expenses you'll have to account for over the next 13 weeks, you can use those figures to create budgets and set spending limits for various NPO activities.
As the weeks go by and you track actual spend versus budgeted in real-time, you can adjust your forecast to better reflect your cash positions.
Tools to help you get started:
We create an annual operating budget template specifically for nonprofits. Start here or reach out and we’ll do your budget for free when you become a new bookkeeping partner with us.
4. Stress test your forecast
Don’t just hope everything will work out—put your findings to the test. Start by creating a list of “what if” scenarios.
Ask yourself:
- What if a grant gets delayed? How will you adjust your finances until the money comes through?
- What if donor contributions dip in Q4? How will you make up the revenue?
- What if your program grows and expenses increase? Will you reallocate funds or seek out new revenue opportunities?
From there, you should build out contingency plans to address those scenarios should they actually happen. Establish a minimum cash cushion that will cover at least one month of operation.
Finally, identify backup sources, such as new lines of credit, reserve draws, or donor asks that can boost cash inflows.
5. Review and revise regularly
Cash flow management is not a set-it-and-forget-it task. Be sure to schedule weekly updates and monthly reviews with your leadership team or Board to go through your finances and flag any major variances between what you expected and what actually happened.
Still feeling unsure? The value of outsourced accounting
Sometimes, it's best to look for outside help to sort your finances. If your nonprofit lacks a dedicated finance team or you're constantly reacting to cash issues, it may be time to look for an outsourced accounting team.
You can access operational accounting services and real-time financial insights from outsourced finance partners and lean on them to build your confidence through collaboration. Plus, outsourcing is more affordable than hiring in-house accountants—a big plus when you’re watching your spending.
Take back control of your mission
Constant stress over where money is coming from and a crippling sense of anxiety that you won't be able to support your mission—that’s your stark reality right now. But it doesn’t have to be.
By implementing better cash flow management and using available tools to gain visibility into your finances, you can get a better hold on the resources you have available and banish financial stress to the dark corners of the universe.
Ready to gain confidence in your cash flow?
Hiline supports nonprofit leaders like you. We give you an expert dedicated team and the same powerful tools used by tech-forward companies, tailored to your mission, and priced for your reality.
Reach out today to get started!
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