Giving Compass' Take:
- Matthew Viola writes about the importance of non-profit organizations having funds to fall back on during hard times in order to ensure that they can continue operations when necessary.
- Why is it difficult for non-profits to find funders willing to finance savings funds? How can funders strike a balance between prioritizing direct impact and keeping organizations that carry out impact work afloat?
- Read more about the benefits and drawbacks of unrestricted funding.
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The term working capital is traditionally used as a liquidity metric in the form of a dollar amount. In addition, many individual financial plans include having a savings account, often referred to as “rainy day funds”, to be used when the “storm” comes.
Charity Navigator wanted to evaluate the ability of a nonprofit to have funds on hand that would allow them to sufficiently operate during difficult financial times. In economic downturns, nonprofits may face revenue declines due to donations lagging behind expectations. A nonprofit with insufficient funds may, in those difficult times, need to make tough choices which include eliminating program offerings or staff members. It would be a shame if charities that provide such important services had to either close completely or cut their charitable programs if they were not prepared in advance.
Read the full article about working capital for non-profits by Matthew Viola at Charity Navigator.