As donation revenue declines for nonprofits across the board, it’s more important than ever to manage your organization’s funding responsibly and effectively. Maintaining financial health isn’t just about fundraising—it’s the way that you store, monitor, and manage your nonprofit’s cash reserves that matters most.

But with a banking system that prioritizes businesses over nonprofits, it can be a challenge to access enough coverage and liquidity to effectively manage all the funds you need to support your mission. Fortunately, there’s a solution—banking partners and cash management strategies tailored to nonprofit needs.

In this guide, we’ll provide tips you can use to support your cash management strategies and explain how to get better rates, coverage, and liquidity with the right partner. We’ll cover:

Cash management can feel overwhelming, but it’s essential to the success of your nonprofit. Let’s start exploring the basics so you can improve your strategies today.

Get better rates and more specialized cash management services with Infinite Giving. Click to contact our expert nonprofit financial advisors today.

What is Cash Management for Nonprofits?

Cash management for nonprofit organizations refers to all the strategies you use to manage cash flow, steward your reserve funds, and responsibly handle donation revenue.

This involves a variety of activities, from storing operational reserves to insuring your funds safely to reporting on your nonprofit’s assets and liabilities. It’s more than budgeting and filing tax forms—strategic cash management is about putting your funds to work and achieving long-term financial sustainability for your organization.

What do we mean by “cash”?

Keep in mind that cash management isn’t limited to physical cash. Most nonprofits have a variety of funds in reserve that they may or may not think of as “cash” but still make up their pool of liquid assets.

For the purposes of nonprofit cash management, the term “cash” includes your organization’s:

  • Operational reserves (rainy day fund)
  • Project-related and capital reserves
  • Non-cash assets like stocks and endowments
  • Multi-year grants you’ve been awarded
  • Scholarship funds

Ideally, you want all of these assets to be highly liquid so you can access them quickly when you need them. That’s why a key part of cash management is storing your funds in low-risk, liquid holdings.

Importance of Cash Management for Nonprofit Organizations

Smart cash management is essential for every organization, business, and individual to stay afloat and achieve their goals. For nonprofits, however, it’s especially vital since you’re working with donated funds and have a responsibility to use those funds wisely and transparently to further your mission.

But the benefits of cash management for nonprofits go beyond meeting your financial responsibilities. By managing your funds wisely, you can access:

Infographic showing three reasons cash management for nonprofit organizations is important, also listed in the text below
  • Better financial transparency. Diligently tracking your cash flows and reserve fund growth gives you better insight into your organization’s full financial situation. With a more accurate picture of your current and historical finances, you can plan fundraisers, programs, and future investments accordingly.
  • Increased financial sustainability. The right cash management strategies help your nonprofit steward its funds and become more financially sustainable long term. By placing your funds in low-risk, highly liquid holdings like treasury bills, for instance, you give them the potential to grow over time and enable you to better support your mission.
  • Higher levels of donor trust. When you fulfill your organization’s responsibility to donors by using their funds effectively and transparently, you’ll cultivate more trust and loyalty. This not only increases the likelihood that donors will continue giving to your organization, but it can also inspire supporters to spread the word about the value of your nonprofit to others and boost donor acquisition.

Ultimately, the better you manage your funds, the better you’ll be able to serve beneficiaries and sustain donor relationships long-term.

Where Should Nonprofits Keep Their Cash Reserves?

Deciding where to keep your nonprofit’s various cash reserves is a major part of cash management. Where you store your funds determines important factors like your interest rates, FDIC insurance coverage, and fund liquidity (how quickly you can access and withdraw your funds).

Traditional bank accounts are often not the best financial option for nonprofits. This is because they typically offer low rates and liquidity as well as strict limits on the amount of funds the FDIC will cover in a single account.

Instead, our nonprofit financial experts recommend storing your reserve funds in:

Three places where nonprofits should keep their case reserves for effective cash management, explored in the text below

Sweep accounts

A sweep account is a type of brokerage account that provides you with more FDIC coverage than you could typically access in a single account. This means that if a bank fails, more of your nonprofit’s funding is protected by the US government. Plus, you’ll streamline bookkeeping since you can manage significantly more FDIC-insured funds from a single account.

If you partner with Infinite Giving, we can open a sweep account for you that insures up to $5 million of your cash reserves, with no minimums.

CDs for nonprofits

Another option for storing cash reserves long-term is to purchase one or more Certificates of Deposit (CDs). CDs for nonprofits often have fixed interest rates and maturity periods, such as one or five years. While the interest rates may be higher than other savings options, laddering CDs means your funding is less liquid and harder to access when you need it.

Treasury bills

US treasury bills are highly liquid, government-secured investments that typically offer high returns if you hold them until maturity. This makes treasury bills an appealing low-risk option for many nonprofit cash management strategies. Additionally, you can work with a nonprofit investment advisor to purchase treasury bills as part of a rolling portfolio to continuously repurchase them after each yield.

Start stewarding your funds in sweep accounts, CDs, and treasury bills with Infinite Giving. Click to get started with expert cash management for nonprofits.

Best Cash Management Strategies for Nonprofits

Now that you know the basics, explore these top cash management strategies for nonprofits looking to steward their funds and become more sustainable.

Regularly monitor your organization’s cash flow.

Consistently monitoring and reporting on your organization’s income and expenses is the most important nonprofit financial practice. Without a thorough understanding of how money flows into and out of your organization, you won’t be able to implement any other cash management strategy.

Ensure that you have a system in place for monitoring cash flow. Whether you handle it internally or outsource it to a fractional CFO or bookkeeping professional, make sure that you:

  • Use secure accounting or bookkeeping software to track income and expenses.
  • Create monthly financial reports and share them with your nonprofit’s board of directors.
  • Accurately fill out and compile financial statements to stay compliant with IRS reporting requirements.

In your financial reports, be sure to clearly differentiate all the types of revenue and expenses listed. For instance, you should list which revenue comes from donations, grants, investment income, membership dues, etc.

Create realistic budgets and financial forecasts.

Based on your current cash flow, previous financial performance, and expected income, create detailed budgets for your organization’s spending. Using both your historical financial data and financial projections will help you set realistic spending thresholds, which is crucial for effective planning and goal-setting.

Follow financial risk management best practices.

Like most financial endeavors, cash management for nonprofits naturally comes with a level of risk, specifically relating to cybersecurity, fraud, and regulatory compliance issues. However, you can mitigate these risks by following a few best practices, such as:

  • Establishing governance that provides financial oversight and accountability, such as a finance committee that regularly reviews budgets and spending.
  • Implementing cybersecurity measures like encryption and firewalls to protect sensitive financial data.
  • Creating an Investment Policy Statement (IPS) with clear guidelines about your organization’s investing and cash management strategies.

A nonprofit investment advisor can help you implement these measures, especially when it comes to developing cash management policies. They’ll work with your board and leadership team to delegate responsibilities, decide where to keep your reserve funds, and set reporting guidelines.

Diversify your revenue streams.

Diversifying your nonprofit’s revenue streams gives you more opportunities to bring in consistent income for your organization, sustaining operations in between fundraising campaigns and seasons with donation lulls. In addition to cash donations, seek out:

  • Non-cash donations like stocks, crypto, and DAF grants
  • Investment income
  • Short- and long-term grants
  • Corporate donations and sponsorships

While some of these revenue streams require you to spend time and effort submitting detailed applications, you can tap into non-cash donations easily. Partner with Infinite Giving to get your own branded donation page where donors can give stocks, crypto, DAF grants, and endowments quickly.

Infinite Giving’s asset donation page, which you can use to diversify revenue streams as part of your cash management strategies for nonprofits

Keep 6-12 months’ worth of cash reserves.

Every nonprofit should have a reserve fund or rainy day fund that allows them to prepare for emergencies, unexpected challenges, and economic downturns. Aim to keep enough money in your reserve fund to cover about 6-12 months’ worth of your standard operating costs. This way, you’ll have a solid foundation to carry you through any changes that are out of your control.

Use a sweep account to get more FDIC coverage.

As mentioned earlier, traditional bank accounts have a limited amount of FDIC coverage—only up to $250,000 per account is insured. This leads many nonprofits to open several different accounts that each hold $250,000 to maintain enough FDIC coverage. However, this is a tedious process that makes bookkeeping difficult and often limits your ability to access funds.

With a sweep account, you can access up to $5 million in FDIC coverage in a single account.

Illustration of different accounts’ FDIC coverage, which is an important part of cash management for nonprofit organizations

Keeping your funds in a brokerage account with a sweep program enables you to protect more of your organization’s money and significantly streamline your books.

Steward your reserve funds with low-risk, high-liquidity strategies.

Keeping your reserve funds in traditional savings accounts won’t benefit your organization in the long run. Instead, the best cash management strategy is to steward your reserve funds well by keeping them in low-risk, high-liquidity holdings. This way, you’ll give your funds the opportunity to grow and you can access them quickly when you need them.

Low-risk, high-liquidity investments typically include:

  • Treasury bills
  • Short-term CDs for nonprofits
  • Money market accounts
  • Mutual funds

Use a brokerage account to access these strategies, and partner with a nonprofit investing advisor for the most specialized, tailored services.

Work with a nonprofit investing advisor.

Nonprofit investment advisors are financial experts with a fiduciary responsibility to work in your organization’s best interest. These professionals have extensive knowledge of cash management for nonprofits and can help you choose the best cash management strategies for your goals.

Look for an investment advisor that offers a variety of cash management services to help you boost your organization’s financial sustainability. For instance, the expert advisors Infinite Giving can help your organization by:

  • Placing your reserve funds in low-risk, high-liquidity strategies.
  • Providing fiduciary investment advising and portfolio management.
  • Making recommendations based on years of nonprofit experience and expertise.
  • Opening a brokerage account for you with up to $5 million in FDIC sweep coverage.
  • Enabling you to easily accept non-cash donations right from your donation page.
  • Giving you access to intuitive dashboards and regular reports for transparent, real-time reporting.

Infinite Giving offers transparent pricing and low fees, and our financial experts use best-in-class, secure technology to provide organizations with the best cash management experience. Connect with our team to start stewarding your reserve funds now.

Wrapping Up

Strategic, responsible cash management is vital for nonprofits’ growth. It’s not only a smart decision to effectively manage and steward your organization’s reserve funds—it’s also the responsible choice.

Want to learn more about putting your reserve funds to work and achieving more financial sustainability? Check out these additional resources:

Ready to improve your financial sustainability with better cash management for nonprofits? Click to learn more about keeping up to $5 million in FDIC-insured reserve funds in an Infinite Giving account.‍