A Simple Model for Cash Flow Management in Nonprofits

18 Pages Posted: 13 Feb 2016 Last revised: 18 Mar 2016

See all articles by Elli Malki

Elli Malki

Financial-Tip; Rothberg International School of the HU - MA in Nonprofit Management and Leadership; Hebrew University - M.A. in Management of Nonprofit and Community Organizations

Date Written: February 13, 2016

Abstract

Cash flow management is one of the most significant challenges that face nonprofit organizations. A shortage is cash, even if it's temporary, is a major risk factor for the organization. Nevertheless the standard method for cash flow management – a cash flow projection - does not produce satisfactory results for nonprofits. The weak point of the cash flow projection method is that it ignores the inherent unpredictability of the income stream. This is a typical characteristic of the nonprofits sector, due to its reliance on income stream from donations and grants.

In this article I present a simple simulation model that overcomes this problem. The simulation model connects between the cash flow and the accounting data. It enables the organization to assess its cash flow risk, and to analyze different scenarios that can eliminate the risk.

The model was tested in several nonprofit organizations, and the article presents its implementation in one of them.

Keywords: cash flow, nonprofits, financial management, budget

JEL Classification: L30, M40, M41

Suggested Citation

Malki, Elli, A Simple Model for Cash Flow Management in Nonprofits (February 13, 2016). Available at SSRN: https://ssrn.com/abstract=2732052 or http://dx.doi.org/10.2139/ssrn.2732052

Elli Malki (Contact Author)

Financial-Tip ( email )

P.O.B. 44034
Jerusalem, 91440
Israel
972-2-6568906 (Phone)

HOME PAGE: http://www.financial-tip.co.il

Rothberg International School of the HU - MA in Nonprofit Management and Leadership ( email )

Boyar Building, Mt. Scoupus
Jerusalem, 91905
Israel
026568906 (Phone)

HOME PAGE: http://www.financial-tip.co.il

Hebrew University - M.A. in Management of Nonprofit and Community Organizations ( email )

Jerusalem
Israel
97226568906 (Phone)

HOME PAGE: http://www.financial-tip.co.il

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