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Effective Cash Flow Management for Nonprofits: 5 Tips

Author Jennifer Alleva

Most nonprofit professionals are narrowly focused on driving impact and pushing their missions forward. They work tirelessly to create quality programming, manage volunteers, and nurture donor relationships.

While all of these tasks are important, they require a foundation of financial stability that keeps nonprofits running smoothly. When management puts in the time to ensure their organization has effective cash flow management, they can be confident in their ability to meet financial obligations, continue operations, and achieve goals.

In this guide, we’ll provide five tips to help you manage your nonprofit’s cash flow and keep your organization afloat.

1. Optimize your fundraising strategies.

As a nonprofit, a significant portion of your revenue likely comes from fundraising. When you optimize your fundraising strategies, you can maximize the funds your organization brings in, increasing cash inflows.

To strengthen your fundraising approach, your nonprofit can:

  • Segment donors. Grouping your donors into relevant segments can help you personalize your communications with them and tailor your fundraising asks. By customizing your outreach, you’ll increase the chances that donors will contribute and effectively boost cash inflows. For example, NXUnite’s data collection guide recommends gathering giving data, such as type of supporter, giving amount, and giving frequency. Then, you can create segments based on these characteristics and send donors personalized appeals that they’re more likely to respond to.

  • Create a strong case for support. Your case for support outlines why donors should support your organization. In this document, you’ll include a brief history of your organization, your mission statement, your services, the need for your project, and an explanation of your project. With a strong case for support, you can persuade donors to contribute to your campaign and generate more revenue.

  • Incorporate donor feedback. Listening to your donors allows you to design fundraising campaigns and materials that align with their interests and preferences. Send a survey after each fundraising push asking your donors about the strengths and weaknesses of your campaign, and incorporate their responses into your strategy.

For extra fundraising support, work with a fundraising consulting firm. A dedicated fundraising consultant can help you adjust your fundraising approach based on the strategies they’ve seen work for other organizations and your nonprofit’s unique fundraising history.

2. Diversify your revenue streams.

The more revenue sources your organization takes advantage of, the more stable your nonprofit will be. If one revenue stream dries up, you’ll still have plenty of other ways to generate funds and keep cash flowing into your organization.

Common nonprofit revenue streams include:

  • Donations. Monetary donations are typically the core of an organization’s fundraising efforts. These may include individual donations, major gifts, and planned gifts.

  • Grants. Nonprofits may secure grants from private, community, or corporate foundations or federal, state, or local government agencies. They require your organization to seek grant opportunities, apply for funding, and use the resulting funds responsibly.

  • Sponsorships. Your organization can partner with local businesses, national companies, or international corporations to fund your events, equipment purchases, or new programming. Companies often partake in sponsorships to support their corporate social responsibility (CSR) efforts, which your nonprofit can promote to its community in return.

  • Program fees. If your nonprofit offers paid experiences like workshops or charges membership dues, then you already generate income from program fees.

  • In-kind donations. Your organization can also accept non-monetary donations, known as in-kind contributions. These include goods, such as clothing, equipment, and canned goods, and services, such as marketing support, legal advice, and consulting.

With multiple revenue streams, your organization can allocate its resources more effectively, enhance its strategic planning, and stay strong in the face of financial distress or broader economic challenges.

3. Forecast and monitor your cash flow.

While the first two tips we’ve reviewed involve increasing cash flow, you also have to put energy into predicting and monitoring your cash flow. Creating a cash flow forecast allows your organization to estimate future cash inflows and outflows to make more informed decisions about resource allocation.

This process involves:

  • Projecting revenue from donations, grants, sponsorships, program fees, and any other revenue streams

  • Predicting expenses, such as salaries, operating costs, and program costs

Once you’ve forecasted your cash flow, you’ll need to monitor it regularly and update it as conditions change. One of the best ways to do so is by compiling an accurate Statement of Cash Flows.

As YPTC’s nonprofit financial statements guide explains, this statement requires you to monitor and report on your:

  • Cash Flows from Operating Activities, which include cash inflows from donations, program fees, grants, and membership dues, as well as outflows from staff salaries, utilities, supplies, and rent. 

  • Cash Flows from Investing Activities, which include cash inflows from investment sales or maturities and outflows from investment, property, or equipment purchases.

  • Cash Flows from Financing Activities, which include cash inflows from lines of credit and loan proceeds and outflows from debt payments.

  • Changes in Cash, Cash Equivalents, and Restricted Cash, a section at the bottom of your statement that allows you to assess changes in your cash flows over time.

Your Statement of Cash Flows can help you assess your cash flows at a glance and determine where you need to make adjustments to maintain adequate liquidity.

4. Use the right tools.

The right technology can help you manage your cash flow more efficiently and provide the data you need to improve your cash flow management strategy.

These tools may include:

  • Accounting software. With the right accounting software, you can track your income and expenses, generate financial reports, and access cash flow forecasting features.

  • Budgeting tools. There are tons of budgeting tools out there that can help your organization with financial planning and forecasting.

  • Financial dashboards. Visualizing your financial data through a dashboard provides a more intuitive way to manage your cash flow.

  • Donor management system. Create donor profiles with demographic data, donation history, communication preferences, and other notable information to form stronger donor relationships and thereby increase cash flow.

  • Grant management software. Use grant management software to effectively track, manage, and report on grant funding.

Before investing in a new software solution, take stock of your nonprofit’s current tech stack to identify any gaps. Then, work with your team to prioritize the platforms that will truly improve your cash flow management process.

5. Work with a professional.

You likely don’t have time to focus on all of these elements of cash flow management within your existing team. To unlock financial expertise and assistance, consider hiring a fractional CFO.

A fractional CFO provides part-time financial services. They can help you with a variety of financial needs, including:

  • Budgeting, forecasting, and variance analysis

  • Scenario planning and cash flow forecasting

  • Financial planning and analysis

  • Data visualization

  • Grant management

  • Financial policy and procedure development

  • Risk management

  • Accounting system implementation

Look for a provider with experience working with nonprofits, a strong background in financial management, a flexible approach, and an interest in or alignment with your mission.

An investment in proper cash flow management is an investment in your organization’s future. Whether you choose to focus on these areas in-house or outsource a professional to assist with your financial strategy, dedicating time and resources to cash flow management will not only help you boost your liquidity to cover your expenses, but it will also put your nonprofit in a better position to pursue its mission for years to come.

About the Author

Jennifer Alleva is the Chief Executive Officer at Your Part-Time Controller, LLC (YPTC), a leading provider of nonprofit accounting services and #65 on Accounting Today’s list of Top 100 accounting firms. Jennifer brings over three decades of expertise in accounting and leadership to her role as CEO of YPTC. A graduate of Boston College and a Certified Public Accountant, Jennifer joined \ YPTC in 2003 following a career in public accounting with Arthur Andersen and serving as Director of Finance and CFO for several companies. Jennifer was named YPTC Partner in 2007 and served as YPTC Managing Partner from 2018 to 2024.  As an advocate for excellence in nonprofit financial management, Jennifer has dedicated herself to educating Executive Directors and Board members on best practices in the field. Her commitment to advancing the accounting profession and nonprofit sector is reflected in her tenure as an adjunct professor at the University of Pennsylvania Fels Institute, her frequent speaking engagements on nonprofit financial management issues, and her role as the founder of the Women in Nonprofit Leadership Conference in Philadelphia.  When Jennifer joined YPTC in 2003, the firm consisted of just over 10 staff members. Since then, she has helped grow YPTC into one of the fastest growing accounting firms in the country. Throughout this growth, Jennifer has fostered countless opportunities for staff members to grow and expand their skills, contributing to YPTC’s consistent recognition as a Best Place to Work.  Jennifer’s passion for promoting the nonprofit’s mission-driven work extends beyond her professional endeavors. She has served as Treasurer of the Board for Catholic Partnership Schools in Camden, NJ, and has served on the Board of the Greater Philadelphia Cultural Alliance. Jennifer was a charter member of South Jersey Impact100, an organization dedicated to philanthropy and community impact. And, in 2021, Jennifer launched the Mission Business Podcast, which spotlights professionals and narratives from the nonprofit sector. Jennifer Alleva’s leadership, expertise, and commitment to the nonprofit sector have not only contributed to Your Part-Time Controller, LLC’s significant growth, but have also advanced the field of nonprofit financial management. Through her professional achievements and community involvement, Jennifer continues to empower those dedicated to positively impacting the world.

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