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0nonprofitfinancefund.org ©2018 Nonprofit Finance Fund®
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Welcome! Below Are a Few Housekeeping Items to Review Before We Get Started
nonprofitfinancefund.org ©2018 Nonprofit Finance Fund®
Presented by
Nicole CurtainSenior Associate, Advisory Services
NFF Webinar SeriesPart 2: Using Data for Day-to-Day Management & Communicating With Stakeholders
Cash Flow Planning
2nonprofitfinancefund.org ©2018 Nonprofit Finance Fund®
Nonprofit Finance Fund Where Money Meets Mission
NFF envisions a world where capital and expertise
come together to create a more just and vibrant
society. We unlock the potential of mission-
driven organizations through:
▪ Tailored investments
▪ Strategic advice
▪ Accessible insights
3nonprofitfinancefund.org ©2018 Nonprofit Finance Fund®
2018 National Webinar Series: Strategic Financial Management Tools
Financial Literacy
Financial Comm-
unication
Financial Planning & Reporting
Financial Management &
Decision-Making
Part 1: Basics of Nonprofit Finance
Part 2: Tools for Managing the Day-to-Day and Stakeholder Communication
Part 3: Tools for Strategic Decision Making
Webinar 1: The Big Picture
Webinar 2: Reading Financial Statements
Webinar 3: What Every Board Member Should Know About Nonprofit Finance
Webinar 4: Budgeting Basics
Webinar 5: Strategic Budgeting
Webinar 6: Cash Flow Planning
Webinar 7: Dashboard Development
Webinar 8: Telling your Financial Story
Webinar 9: Program Economics
Webinar 10: Untangling Multiple Views of Cost
Webinar 11: Scenario Planning
Webinar 12: Planning for Growth
Webinar 13: Building Long-Term Financial Health to Manage Risk and Leverage Opportunities
Webinar 14: Partnerships and Collaborations
4nonprofitfinancefund.org ©2018 Nonprofit Finance Fund®
Today’s Goals
Use financial data to share your story & advocate for your needs
Learn best practices around cash flow tools in order to manage finances in an uncertain world
Develop a plan for creating your own cash flow tool
Share our expertise with one another and provide support
5nonprofitfinancefund.org ©2018 Nonprofit Finance Fund®
Understanding Nonprofit Capitalization
Appropriate capitalization can support:
Liquidity
Durability
Adaptability
Longer-term
Near-term
6nonprofitfinancefund.org ©2018 Nonprofit Finance Fund®
Cash Flow Quiz
True or false…
1. Deficits can cause cash flow challenges.
2. If an organization has a cash flow challenge, it must be the result of a deficit.
3. An organization’s annual budget will tell me if they are going to face cash flow challenges during the year.
4. Cash flow challenges = bad management.
TRUE
FALSE
FALSE
FALSE
7nonprofitfinancefund.org ©2018 Nonprofit Finance Fund®
How Do Cash Flow Projections Differ from the Budget?
Budget ≠ Cash Flow Projection
The budget cannot identify cash flow challenges that may
occur during the year
A cash flow projection is a separate document that
forecasts the timing of cash in and cash out of the
organization
If your organization uses cash basis of accounting, the
budget will present total cash in and out for the entire
fiscal year – not monthly ebbs and flows
Source: http://clipartoons.com/wp-content/uploads/2016/01/musical-instruments-clip-art.jpg
8nonprofitfinancefund.org ©2018 Nonprofit Finance Fund®
Cash vs Accrual Accounting
Cash Accounting
Similar to balancing a checkbook
Measures cash coming in and cash going out
Common for small and / or relatively simple organizations
Accrual Accounting
More comprehensive
Measures revenue when earned and expenses when
incurred
Revenue & Expense ≠ Cash
▪ “Cash in” is not always the same as
revenue, and
▪ “Cash out” is not always the same as
expense
9nonprofitfinancefund.org ©2018 Nonprofit Finance Fund®
The Importance of Cash Flow Projections
A cash flow projection gives you:
A visual landscape of gaps and areas of risk
An estimate of cash availability
A picture of financial health (or lack of)
More certainty
Projecting cash flows gives a better understanding of financial health:
Liquidity
Balance sheet strength
10nonprofitfinancefund.org ©2018 Nonprofit Finance Fund®
Step #1: Use Current Budget and Examine Last Year’s Checkbook for Historical Flows
11nonprofitfinancefund.org ©2018 Nonprofit Finance Fund®
Jan-18 Feb-18
Begninning cash balance 120 140
Cash reciepts
Admission/ticket sales 40
Foundation grant 110
Net assets released from restriction -
Total cash receipts 150
Cash spent
Payroll 40
Rent 90
Total cash spent 130
Net cash in/(out) 20
Ending cash balance 140
Step #2: Project Cash Flow Using a Basic Example
Poll Question:
What is potentially missing from this cash
flow projection?
a) Restricted funds are not separated
b) Non-operating funds are not separated
c) Both a & b
In thousands
12nonprofitfinancefund.org ©2018 Nonprofit Finance Fund®
Jan-18 Feb-18
Begninning cash balance 120 140
Beginning cash balance w/out restrictions 100 90
Cash receipts w/out restrictions
Admission/ticket sales 40
Foundation grant 70
Net assets released from restriction 10
Total cash receipts w/out restrictions 120
Cash spent
Payroll 40
Rent 90
Total cash spent 130
Net cash w/out restrictions in/(out) (10)
Ending cash balance w/out restrictions 90
Cash with restrictions
Cash received with restrictions 40
Cash released from restrictions 10
Net cash w/ restrictions in/(out) 30
Total net cash 20
Ending cash balance 140
Step #3: Separate Unrestricted & Restricted Cash
In thousands
13nonprofitfinancefund.org ©2018 Nonprofit Finance Fund®
Jan-18 Feb-18
Begninning cash balance 120 140
Beginning operating cash balance w/out restrictions 100 80
Operating cash receipts w/out restrictions
Admission/ticket sales 40
Foundation grant 20
Net assets released from restriction 10
Total operating cash receipts w/out restrictions 70
Operating Cash spent
Payroll 40
Rent 50
Total operating cash spent 90
Net operating cash w/out restrictions in/(out) (20)
Ending operating cash balance w/out restrictions 80
Net cash w/ restrictions in/(out) 30
Non-operating
Capital grant 50
Capital project expenditure 40
Net non-operating cash in/(out) 10
Total net cash 20
Ending cash balance 140
Step #4: Separate Unrestricted, Operating Cash Balance
In thousands
14nonprofitfinancefund.org ©2018 Nonprofit Finance Fund®
Fiscal year end: Dec 31 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18
Total
PROJ CF
PROJ PROJ PROJ PROJ PROJ PROJ PROJ PROJ PROJ PROJ PROJ PROJ FY 2018
Begninning cash balance 75 304 273 304 201 190 138 181 158 308 309 224 75
Beginning operating cash balance w/out restrictions 47 36 5 36 (67) (78) (10) 33 10 160 161 76 47
Operating cash reciepts
Total earned 15 - 50 - - - 10 - 10 - - - 85
Total foundations 20 - 25 - 30 15 85 15 130 10 45 10 385
Total government - - - - - - - - 50 30 - - 80
Total corporations - 15 - - - - - - - - - - 15
Special event(s) - 5 10 - 25 10 - - - - - - 50
Individuals 2 - - - - - - - - - - 8 10
Board - - - 2 - - 2 - 1 - - - 5
Net assets released from restrictions - - - - - 120 - - - - - - 120
Total operating cash receipts w/out restrictions 37 20 85 2 55 145 97 15 191 40 45 18 750
Operating cash spent
Total personnel 35 35 35 35 35 53 35 35 35 35 53 35 456
Total consultants/contractors - 5 - 60 - - 10 - - - 60 - 135
Total occupancy 6 1 1 1 2 1 1 2 1 1 1 1 21
Total support 7 9 18 9 29 23 8 2 4 2 17 3 132
Total operating cash spent 48 50 54 105 66 77 54 39 41 39 131 40 743
Net operating cash w/out restrictions in/(out) (11) (30) 31 (103) (11) 68 43 (24) 150 1 (86) (22) 7
Ending operating cash balance w/out restrictions 36 5 36 (67) (78) (10) 33 10 160 161 76 54 54
Cash with restrictions
Cash received with restrictions 240 240
Cash released from restrictions 120 120
Net cash w/restrictions in/(out) 240 0 0 0 0 (120) 0 0 0 0 0 0 120
Ending cash balance 304 273 304 201 190 138 181 158 308 309 224 202 202
Step #5: Identify Anticipated Financing Needs
15nonprofitfinancefund.org ©2018 Nonprofit Finance Fund®
Common Uses for Cash Flow Projections
Monitor availability of cash and plan cash needs
Analyze the timing and reliability of incoming and outgoing cash
Look for trends; which months are more difficult? Why?
Determine cash flow management strategies
Draw on reserves or line of credit
Accelerate collection of receivables
Change the timing of particular events or annual appeals
Negotiate favorable payment plans with vendors
CASH Issues: loss of funding that produces a cash shortage or gap
CASH FLOW Issues: temporary lack of cash due to timing of receipts
16nonprofitfinancefund.org ©2018 Nonprofit Finance Fund®
Fiscal year end: Dec 31 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18
Total
PROJ CF
PROJ PROJ PROJ PROJ PROJ PROJ PROJ PROJ PROJ PROJ PROJ PROJ FY 2018
Begninning cash balance 75 304 273 304 276 285 233 201 178 308 309 224 75
Beginning operating cash balance w/out restrictions 47 36 5 36 (67) (78) (10) 33 10 160 161 76 47
Beginning operating cash balance after financing activities w/out restrictions 47 36 5 36 8 17 85 53 30 160 161 76 47
Operating cash reciepts
Total earned 15 - 50 - - - 10 - 10 - - - 85
Total foundations 20 - 25 - 30 15 85 15 130 10 45 10 385
Total government - - - - - - - - 50 30 - - 80
Total corporations - 15 - - - - - - - - - - 15
Special event(s) - 5 10 - 25 10 - - - - - - 50
Individuals 2 - - - - - - - - - - 8 10
Board - - - 2 - - 2 - 1 - - - 5
Net assets released from restrictions - - - - - 120 - - - - - - 120
Total operating cash receipts w/out restrictions 37 20 85 2 55 145 97 15 191 40 45 18 750
Operating cash spent
Total personnel 35 35 35 35 35 53 35 35 35 35 53 35 456
Total consultants/contractors - 5 - 60 - - 10 - - - 60 - 135
Total occupancy 6 1 1 1 2 1 1 2 1 1 1 1 21
Total support 7 9 18 9 29 23 8 2 4 2 17 3 132
Total operating cash spent 48 50 54 105 66 77 54 39 41 39 131 40 743
Net operating cash w/out restrictions in/(out) (11) (30) 31 (103) (11) 68 43 (24) 150 1 (86) (22) 7
Ending operating cash balance w/out restrictions 36 5 36 (67) (78) (10) 33 10 160 161 76 54 54
Cash with restrictions
Cash received with restrictions 240 240
Cash released from restrictions 120 120
Net cash w/restrictions in/(out) 240 0 0 0 0 (120) 0 0 0 0 0 0 120
Non-operating cash receipts
Capital grant -
Draw on line of credit (LOC) 75 20 95
Non-operating cash spent
Capital expenditures -
Repayment of LOC 75 20 95
Net non-operating cash in/(out) 0 0 0 75 20 0 (75) 0 (20) 0 0 0 0
Ending operating cash balance after financing activities w/out restrictions 36 5 36 8 17 85 53 30 160 161 76 54 54
Ending cash balance 304 273 304 276 285 233 201 178 308 309 224 202 202
Step #6: Incorporate Anticipated Financing Needs
17nonprofitfinancefund.org ©2018 Nonprofit Finance Fund®
Accessing Capital for Cash Flow Shortages
Line of Credit Bridge Loan
Can help address periodic or recurring CASH FLOW issues
Provide cash for timing gaps between disbursement and receipt of cash
Monthly interest paid on outstanding balances
Non-use fee paid if the line of credit is not being used
Bridge timing gap from a specific source.
Cover expenses until the particular source of funds is received
Principal repayment is required upon receipt of funds
Monthly interest payments are required, generally from the organization’s operating cash flow
18nonprofitfinancefund.org ©2018 Nonprofit Finance Fund®
Accessing Capital for Cash Flow Shortages Continued
When choosing to access debt, conversations with your banker must be ongoing, deep, and fully transparent
Short- and long-term plans for the organization
Leadership that has the ability to lead through changing economic and funding environment
Evidence of reporting and processes in place to measure progress against budget and ability to course correct
Funding commitments / contracts for next 12 months
Multiple scenarios for potential reductions or loss in funding
Track record of support from community and funders
Engaged board of directors
19nonprofitfinancefund.org ©2018 Nonprofit Finance Fund®
Step #7: Update Projections with Actual Results
Fiscal year end: Dec 31 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18
ACTUAL ACTUAL ACTUAL PROJ PROJ PROJ
Begninning cash balance 75 297 283 363 270 259
Beginning operating cash balance w/out restrictions 47 29 15 95 2 (9)
Operating cash reciepts
Total earned 10 - 50 - - -
Total foundations 15 - 60 - 30 15
Total government - 10 - - - -
Total corporations - 10 - - - -
Special event(s) - 3 10 - 25 10
Individuals 2 - - - - -
Board - - - 2 - -
Net assets released from restrictions - - - - - 120
Total contributed w/out restrictions 17 28 70 2 55 145
Total operating cash receipts w/out restrictions 27 28 120 2 55 145
Operating cash spent
Total personnel 35 30 30 25 35 53
Total consultants/contractors - 5 - 60 - -
Total occupancy 5 1 1 1 2 1
Total support 5 6 8 9 29 23
Total operating cash spent 45 42 39 95 66 77
Net operating cash w/out restrictions in/(out) (18) (14) 81 (93) (11) 68
Ending operating cash balance w/out restrictions 29 15 95 2 (9) 59
Cash with restrictions
Cash received with restrictions 240
Cash released from restrictions 120
Net cash w/restrictions in/(out) 240 0 0 0 0 (120)
Ending cash balance 297 283 363 270 259 207
20nonprofitfinancefund.org ©2018 Nonprofit Finance Fund®
Common Missteps in Cash Flow Projections
Not including a beginning (and ending) cash balance
Straight-lining income and expenses
Not accounting for the accurate number of weeks in a particular month
Comingling restricted cash with unrestricted operating cash
Insufficient OR too much detail
Not noting cash in from receivables incurred in earlier periods
21nonprofitfinancefund.org ©2018 Nonprofit Finance Fund®
What are my greatest cash flow
challenges?
What activities are core to mission? How do these
activities impact cash flow?
What are my non-negotiable cash
needs?
How might cash inflows be affected
by the current economy?
Updated Tax Code?
Can payments to vendors be delayed?
If so, how long?
How will operating changes affect
reserves and the ability to manage
cash flow?
Strategic Questions Putting the Cash Flow Document to Use
22nonprofitfinancefund.org ©2018 Nonprofit Finance Fund®
• Engage staff, board and funders in data-driven strategic conversations
• Understand the implications of new funding and/or timing of events
Strategic Decisions
• Develop explicit contingency plans
• It’s difficult when forced to take drastic action without a thoughtful plan
Worst Case Plan
• Determine the triggers that lead to Plan B or Plan C
• For example: if X revenue does not arrive by Y, we will cut or delay Z expenses
Identify Triggers
Plan Your Response
23nonprofitfinancefund.org ©2018 Nonprofit Finance Fund®
Main Takeaway:Own Your Numbers
Leadership needs to know the financial position of its organization to act effectively
Good financial decision-making requires timely, accurate and transparent financial information
Tools are only as good as the assumptions behind them
Cash flow projections are a tool to plan cash needs and monitor availability of cash
Considerations and best practices for building cash flow statements include:
Be conservative but not excessively
Update your cash flow projections regularly
▪ Revise forecast regularly
▪ Compare projections to actual results; review variances
▪ Changes to cash flow projections may impact other financial reports
24nonprofitfinancefund.org ©2018 Nonprofit Finance Fund®
2018 National Webinar Series: Strategic Financial Management Tools
Financial Literacy
Financial Comm-
unication
Financial Planning & Reporting
Financial Management &
Decision-Making
Part 1: Basics of Nonprofit Finance
Part 2: Tools for Managing the Day-to-Day and Stakeholder Communication
Part 3: Tools for Strategic Decision Making
1: The Big Picture
2: Reading Financial Statements
3: What Every Board Member Should Know About Nonprofit Finance
4: Budgeting Basics
5: Strategic Budgeting
6: Cash Flow Planning
7: Dashboard Development
8: Telling your Financial Story
9: Program Economics
10: Untangling Multiple Views of Cost
11: Scenario Planning
12: Planning for Growth
13: Building Long-Term Financial Health to Manage Risk and Leverage Opportunities
14: Partnerships and Collaborations
25nonprofitfinancefund.org ©2018 Nonprofit Finance Fund®
NFF Would Like to Thank the Following Organizations for Their Partnership
26nonprofitfinancefund.org ©2018 Nonprofit Finance Fund®
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