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Cash Flow Budgeting: A Tool for Nonprofit Management

Cash Flow Budgeting: A Tool for Nonprofit Management. Prepared by Dawn Finley For the Nonprofit Management Center of the Permian Basin. What is a budget?. A plan showing anticipated expenses and income for a given period of time. . Why prepare a budget?.

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Cash Flow Budgeting: A Tool for Nonprofit Management

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  1. Cash Flow Budgeting: A Tool for Nonprofit Management Prepared by Dawn Finley For the Nonprofit Management Center of the Permian Basin

  2. What is a budget? A plan showing anticipated expenses and income for a given period of time. Why prepare a budget? To plan the financial progress of an organization as it endeavors to meet its mission and goals.

  3. When should a budget be prepared? Usually a budget is prepared annually. What period(s) should be included? Usually compares income and expenses for previous year to income and expenses for the current year and projects one year into the future.

  4. Sample Six-Month Budget (in thousands of dollars.)

  5. Sample Six-Month Budget Detailed (in thousands of dollars.)

  6. Six-Month Budget Charted

  7. Planning for Future Financial Needs The Cash Flow Budget

  8. What is a Cash Flow Budget? A detailed spreadsheet showing estimated future expenses and revenues on a dynamic timetable. When should it be prepared? It is ideally prepared at intervals when the largest cash usage is expected, such as on payroll dates.

  9. Why a Cash Flow Budget? • To project periods in which expenses will exceed anticipated income. • To provide time to adjust, correct or prepare for cash shortfalls. • To improve the Board’s understanding of financial operations. • To predict strategic financial challenges.

  10. Why a Cash Flow Budget? (cont’d) To plan the timing of… • Fundraising events & activities. • Grant applications and/or cycles. • Receipt of non-program revenue. • Major expenditures.

  11. Cash Flow Budgeting Don’t Panic! It may take a little more work, but it’s well worth the effort.

  12. Preparing a Cash Flow Budget. Step 1. Post last year’s actual expenses and revenues on a spreadsheet in the exact intervals when they occurred. (in thousands of dollars.)

  13. Preparing a Cash Flow Budget (cont’d) Step 2 Add increases or decreases and new expenses or revenues in the intervals where they are expected to occur. Step 3 Remove expenses or revenues that are not expected to be repeated.

  14. Preparing a Cash Flow Budget (cont’d) Step 5. Add the cash surplus or subtract the cash shortfall carried forward from last year. (It was $1,000.) Step 4. Subtract expenses from revenues to find net income or net loss. Step 6. Compute cash surpluses or shortfalls for all intervals.

  15. Cash Shortfall? Plan to take action!

  16. Positive Actions Against Shortfalls Increase or accelerate revenues. • Save cash surpluses early in the year to cover shortfalls later. • Raise more money. • Write more grants. • Make arrangements to receive promised funds early if possible. • Draw from endowment proceeds. • Borrow money.

  17. Positive Actions Against Shortfalls(cont’d) Reduce or defer expenses • Reduce spending. • Set up installment payments when possible. • Delay major purchases. • Delay vendor payments. • Sell assets.

  18. Cash Surplus? Take it to the Bank!

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