Streetsmart Financial Basics for Nonprofit Managers

Chapter 11Cash Is King*

*or queen, depending on the realm …

Cash is king in the nonprofit realm as elsewhere. Those who have it can do just about anything. Those who do not, stagger. Adequate cash allows the organization to pay its bills. More than adequate cash gives the organization a source of additional revenue, an operating cushion, and liberation from some of the daily grind of financial existence. Much more than adequate cash confers something more: power.

Some of the most powerful of all nonprofit institutions are hospitals and universities. These institutions, with the exception of small or rural hospitals, almost always have a solid cash position, derived from a number of sources, that they can use either in operations or in investments. Their power comes with their control of capital, and controlling a sizable portion of cash means controlling some potent capital. (For more on the role of capital in a nonprofit organization, see Chapter 12, “Capital: Not a Four-Letter Word.”)

Nonprofit organizations with adequate cash can do two critical things: (1) survive crises and (2) take advantage of opportunities. Few crises are true threats to an organization's existence—even if it may seem that way at the time—as long as the group has the resources to respond. It takes more than cash, of course, but cash can make an effective response immeasurably easier. Similarly, it takes cash to buy a building, to start up a program, or to do some research, and all of these things can ...