Cash flow is an important concept for association staff, volunteers, and leaders to understand especially for small or medium sized associations. A previous article I wrote discusses what cash flow is and how it differs from profit on an income statement. It also includes some ideas to improve cash flow.
Given the COVID-19 pandemic the world has been faced with, cash flow is more important than ever for associations. This article will provide specific tips to help you stay informed of your cash position and have confidence in the future stability of your association given today’s economic uncertainty.
To quickly define, cash flow is a term that refers to how cash moves in and out of the association. Cash inflow is revenue and cash outflow are expenses. Positive cash flow indicates that there was more cash inflow than outflow.
Learn How to Forecast Cash Flow
The first step is creating a forecast for the future of your cash. This will help you determine how long you can maintain operations under the typical spending and earning patterns. This can be done using accounting software or an excel spreadsheet you develop independently, such as this example below.
For a more in-depth spreadsheet, QuickBooks offers one here.
Once you have established your cash flow forecast, you can use it to try out different possible scenarios. There are so many financial unknowns in a pandemic era, so having a tool like this will be a great asset to your association.
Improving Cash Flow
After analyzing your current situation and developing a forecast, you can focus on the way you can best manage your cash. To explore ways to best increase revenue and reduce expenses during the pandemic, read Financial Tips for Managing an Association’s money during a crisis.
A key to success in 2020 has been finding virtual or e-commerce options for associations such as virtual tradeshows, virtual gatherings, or hosting webinars.
As noted in the article, Cash Flow Management for Volunteer Board Members, cash flow is not equal to net income! Higher profits are the goal but meeting the cash needs of the association requires careful consideration. Making sure you understand the difference between cash flow and profit is important.
Planning for the Future
- Communication is Key—both internal and external communication is essential. Successfully run associations are communicating efficiently with their staff and deciding what to share with their membership and volunteer leaders.
- Monitor and Continually Adapt—never assume the job is done! Staying on top of your current cash flow situation and the projected outcomes under several scenarios will require continual monitoring and forecasting. As we have heard so many times in 2020, we need to be able to pivot!
- Stay Informed—know what supports are available for your association. The Government of Canada has launched several programs or deadline extensions in many areas.
A few to note are:
- The CRA is waiving arrears interest payments on outstanding tax debts
- Canada Emergency Business Account Interest Fee Loans (CEBA) providing interest-free partially forgivable loans of up to $40,000. The deadline to apply is December 31, 2020.
- Canada Emergency Rent Subsidy (CERS) provides a rent or mortgage subsidy of up to 65% of eligible expenses to qualifying charities and not-for-profits.
As an association management company, we see the financial and mental toll the pandemic is having on associations across the country. Our goal is to create meaningful leadership and content to help you navigate these times.