How to Forecast Cash Flow for a Nonprofit
Cash is the lifeblood of any organization—including nonprofits. Even if you’re “profitable” on paper, a cash shortfall can disrupt programs, delay payroll, or threaten your mission. That’s why creating a cash flow forecast is one of the smartest financial tools a nonprofit can use.
A cash flow forecast shows when money will come in and go out over time. It helps you plan ahead, avoid surprises, and make better decisions for your mission.
Step 1: Understand the Difference Between Profit and Cash
Your Statement of Activities (P&L) shows revenue and expenses, but it doesn’t always reflect when cash moves. For example:
You may win a $50,000 grant in July, but only receive the cash in quarterly installments.
Donors may pledge money in December, but not pay until January.
Expenses like insurance might be paid annually instead of monthly.
Cash flow forecasting accounts for timing, not just totals.
Step 2: Identify Cash Inflows
List all expected sources of cash, along with the timing:
Grants (note installment schedules)
Donations (seasonal campaigns, monthly giving)
Program fees or earned income
Sponsorships or fundraising events
Investment income (if applicable)
👉 Be realistic. If a donor usually pays late, build that delay into your forecast.
Step 3: Identify Cash Outflows
Next, list when money will leave your bank account:
Payroll (usually your largest expense)
Rent, utilities, insurance
Program costs (supplies, food, services)
Technology and software subscriptions
Loan payments or debt service
Annual or one-time expenses (like an audit or event costs)
Step 4: Build a Timeline
Most nonprofits use a monthly cash flow forecast (12 months out). For higher-risk periods, you may want to create a weekly forecast.
In a simple spreadsheet, create columns for each month and rows for each type of inflow and outflow. Subtract outflows from inflows to see your projected net cash each month.
Step 5: Watch for Red Flags
Review your forecast for periods when cash dips too low. Common issues include:
A gap between when grant money arrives and when expenses hit
Seasonal donation cycles that don’t align with year-round costs
Annual expenses (like insurance) that cause big one-month dips
Step 6: Plan Ahead
Use your forecast to take action before problems arise:
Delay or phase expenses until funding arrives
Build a cash reserve for lean months
Communicate with funders if payment schedules create strain
Explore a line of credit as a safety net (but use wisely)
✅ Final Takeaway
A cash flow forecast doesn’t just prevent crises—it gives you confidence. By knowing when money is coming in and going out, your nonprofit can plan more strategically, reassure your board, and focus on impact instead of uncertainty.
Need help setting up a forecast model tailored to your nonprofit? I work with organizations to create easy-to-use tools that make cash management clear and stress-free.
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