“Recent research confirms that the majority of nonprofits have woefully inadequate reserves in case of funding cuts or, more generally, if there’s a significant downturn in the economy.” – For Purpose Law Group 2020
So, when is the right time to start saving? There’s COVID, right, staffing challenges, economic uncertainty…
Talk with your board of directors at your/their next meeting, as “now” is always the best time to start building a reserve. Recommend setting aside a percentage of revenue going forward. If needed, start with 2 – 5%.
Increase that percentage every year as you’re able, until you’re at 10%.
Whenever an unexpected large donation comes in that is not earmarked for a specific purpose, add a larger part to your reserve.
Eventually, you will have enough money in your reserve to cover 3 – 6 months of expenses. This is a good first goal.
hen, save more to start a future expansion or building project. Take a patient, long-term approach.
Sometimes, board members feel they work for their constituents, first. But, legally and practically, they are responsible for the sustainability and health of the organization. When your board keeps the organization strong, then you’re ready, in good times and bad, to take care of your constituents.
As always, I work for you and am hoping for your every success.
– Elizabeth, Owner of Kronstadt Consulting
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