Five Cash Flow Tips for Nonprofits During COVID-19

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Nonprofit organizations across the nation are experiencing unprecedented changes in demand for services, both positive and negative. Because nonprofit funding often hinges on the organization’s ability to provide certain services, those changes in program activities have brought cash flow planning to the top of every board member’s list of concerns. Whether the organization is experiencing increased demand and expanding operations or considering furloughs because of barriers to delivering services, these five actions can help organizations survive this crisis and position themselves to thrive in the future: 

  1. Communicate with your donors – In response to organizations’ rapidly changing needs, some donors are removing restrictions from donated funds and paying pledges early. Communicating the need for immediate unrestricted liquidity with your donors can make a big difference in your ability to make changes to program services and bridge short-term liquidity gaps. Make sure you get documentation of the release of restrictions and consider future implications of accelerated payments as well. 
  2. Communicate with your lenders – Be proactive and call your financial institution and creditors to inquire about “interest only” and/or payment deferral options on existing debt service, as well as adjustments to your debt covenants. Be prepared with detailed cash forecasts that tell the story of your short-term pivots and long-term strategy. 
  3. Explore new revenue sources – The federal government has set aside billions of dollars for COVID-19 relief through state and local governments, as well as FEMA. If your organization is providing services directly to those affected by this crisis, you may be eligible for this funding. If the receipt of federal or state funds is new for your organization, BKD can help you set up the infrastructure necessary for grant compliance. 
  4. Review expenses and purchasing commitments – Check your general ledger and examine any recurring invoices or outstanding purchase orders. Work with vendors to adjust subscription terms for services you aren’t using and release the organization from minimum purchase or retainer contracts. Your vendors also are performing detailed cash forecasts, so they will appreciate your early and frequent communication of changes to normal activity. 
  5. Stay current – Circumstances can change rapidly, so adjust your accounting processes to produce daily cash status reports. Consider cloud-based accounting systems and related applications that can help with processing both cash receipts and disbursements while maintaining proper controls and oversight in a remote environment. With timely and accurate accounting, you can create a weekly cash flow forecast to project your cash reserve runway and monitor your progress. This forecast should project at least eight weeks and ideally out through an entire business cycle if your activity level is highly cyclical. 

We have put together an easy-to-follow flowchart to help your organization stay on track. Use the chart to review various financial relief options and considerations.

Please note that this information is current as of the date of publication. Legislation and guidance are constantly evolving, so check with your BKD Trusted Advisor™ or visit our COVID-19 Resource Center for current information as needed.

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