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What to Do if Your Nonprofit Doesn’t Have Enough Cash

Your nonprofit probably won’t have more income than expenses in every single one-month period throughout the year. During some periods, you get ahead, and at other times, you fall behind. Your goal is to sustain a generally positive balance over the course of time and be able to cover your most critical bills — payroll, taxes, insurance, and utilities — in a timely manner.

Some government agencies and foundations pay grants as reimbursements for expenses after you’ve incurred them. You may need to prepare your cash-flow plan accordingly while waiting to be reimbursed.

Remember that some times will be lean. Then what? First, your cash-flow projection should help you anticipate when you may fall short. It enables you to plan ahead and solicit board members who haven’t yet made gifts in the current year, send letters to past donors, cut costs, or delay purchases.

Also, you should be proactive about contacting your creditors. If you think you can’t pay a bill on time, call and ask for an extension or explain that you’re forced to make a partial payment right now. Your ability to do business depends on your earning and sustaining other people’s trust. If you can’t have perfect credit, being forthright is the next best thing. It’s hard to do, but important.

Don’t “hide” behind your bills, thinking that if you don’t say anything, nobody will notice. If you’re facing a period of debt, tell your board. Also, call anyone to whom you owe money and explain the situation and your timeline for paying your bills. Among other things, your honesty helps them with their cash flow.

And when your expenses are exceeding your income, always try to cover your federal, state, and local tax obligations, because fees and interest on unpaid taxes add up quickly. If covering those obligations isn’t possible, don’t forget to call those agencies. Setting up a payment plan, both over the phone and in writing, can prevent your assets (or a board member’s) from being frozen.

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