How much money should a not-for-profit have in reserve? Is three months of operating expenses enough? Six months? Or should your board be thinking about reserves in a completely different way?
In this episode of The NFP CEO Podcast, Michelle and Danielle unpack a misunderstood area of nonprofit financial governance: reserves policies.
Many charities and not-for-profits either don't have a reserves policy or rely on outdated rules of thumb that don't reflect today's operating environment. With increasing financial uncertainty, government funding changes, marketisation of services, and growing cash flow pressures, having a clear reserves strategy has never been more important.
Rather than focusing only on how much money should sit in the bank, this episode explores why organisations hold reserves, when they should be used, and how boards can make better strategic decisions about their financial sustainability.
In this episode you'll learn:
- What a reserves policy is and why you should have one
- How much money a not-for-profit should keep in reserve
- Why "three months' operating costs" isn't always the right answer
- The difference between a reserves policy and a minimum reserves policy
- How to calculate reserve requirements using organisational wind-up costs
- When it is appropriate to use financial reserves
- How reserves can fund growth, innovation, acquisitions and strategic investment to meet purpose
- Why reserves improve board governance and CEO decision-making
- The growing importance of reserves as government-funded services move to payment in arrears
- How annual board discussions about reserves strengthen organisational strategy and risk management
Whether you're a CEO, board director, CFO or finance manager, this episode will help you rethink what financial resilience looks like in today's nonprofit environment.
Listen now to discover how a well-designed reserves policy can become one of your organisation's most powerful governance and strategic planning tools.
Connect with us:
LinkedIn: The NFP CEO: Overview | LinkedIn
Website: thenfpceo.com.au
Michelle Cutler: Michelle Cutler | LinkedIn
Danielle Ballantine: Danielle Ballantine | LinkedIn
