There is an old banking truth that turnover is vanity, profit is sanity and cash is king. And whilst it may be old, it is a truth. The primary cause of organisations struggling is not a lack of turnover, it is a lack of cash to pay bills as they fall due. There are a number of reasons why this is important, not least the strict rules about trading insolvently, the duty of care to staff and the importance of achieving charitable mission.

So with this in mind, I am sharing some thoughts on maximising organisational cash flows:

Know your cash flows

A cash flow forecast is a key tool for management and trustees. It predicts the future by showing when cash is received and when bills are due to be paid. The time horizon and the intervals will differ from organisation to organisation; but the duration should be long enough to ensure you have confidence; and the periods should be short enough that you won’t have big movements within it!  For most organisations a monthly view of the next 12 months will be appropriate; but in times of strain, a weekly view may be needed.

Know who you owe

It's important to not have surprises – so make sure that you have accurate records of who your organisations owes money to, and when it is due. This can include capturing spending decisions made by trustees or management. Obviously, the cash flow forecast is the right place to record these.

Know who owes you – and what terms you have agreed

Collecting funds owed to a charity is crucial; particularly if it is contract income. Having a close view of accounts payable – those people from whom you are expecting funds - is key. You should be looking to understand who owes what, any concerns you have around collection and when the funds are expected. At times we are often concerned about relationships if we chase money owed, but it is important to balance this with cash flow. Always be polite but have clear expectations and timelines.

Always ask

Around a third of people don’t recall being asked to give to charity in the last four weeks according to CAF’s UK Giving Report 2022. We also know that most UK donations follow an ask; so it is crucial to keep telling the story of your impact and asking for donations. As an active trustee, I know that this takes planning to ensure that we identify ‘“fundable”’ projects well in advance and consider who may be the best to ask.

Make it easy to pay or to give

Work by the Behavioural Insights Team identified the concept of 'EAST' in social activity (easy, attractive, social and timely), with 'making it easy' being the first principle. Think about how your donors or debtors may wish to pay and then make those channels easy. This may include contactless donations in a shop window, a QR code (available from CAF Donate) on collection points and a card machine for small debtors to pay you.

As you manage your cash flows, always be focused on the forecast elements. This is rarely a 'job done' but an ongoing process on which management and trustees should be focused.

Make your money go further

Manage your day-to-day banking

Invest your reserves

Apply for a savings account

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