Establish a COVID-19 Crisis Management Team
COVID-19 may get worse later in the year and will likely have a lingering effect on your organization for years to come. If you have not done so already, form a crisis management team to monitor internal and external virus-related developments. It should meet regularly to evaluate risks and opportunities and closely follow governmental and health care guidance to ensure compliance.
The crisis management team also should take a hard look at how COVID-19 has played out so far for the organization. They should seek input from stakeholders on what has worked and what has not. As the team identifies gaps, it can devise solutions to improve future responses to pandemics and other crises.
Related Read: Get Your Operating Reserves in Order
One thing is certain: You cannot afford to put off planning, as tempting as it might seem under current circumstances. The financial crisis back in 2008–09 demonstrated that those organizations that took prompt action were more likely to avoid the need for drastic measures later. Contact your ORBA CPA or accountant if you need planning assistance.
Sidebar: Staying on top of the numbers
Before making any critical decisions for the future, whether short- or long-term, not-for-profit organizations need to arm themselves with up-to-date information on their financial status, including their cash positions. In light of the current environment and potential decreases in funding, organizations should strive to maintain cash on hand to cover up to 3 months of expenditures.
Ratios such as the current ratio — current assets divided by current liabilities — provide a snapshot of your ability to satisfy your short-term financial obligations, those due within the coming year. (A current ratio of 1.0 or higher generally indicates the ability to meet such obligations.) But the liquid funds indicator gives you a better understanding of how long you can survive without additional funding:
Liquid funds indicator = Net assets less restricted endowments, land and plant, property and equipment / Average monthly expenses
This figure shows the number of months before the not-for-profit organization will completely exhaust its liquid funds, assuming it receives no additional revenue inflows. To get a fuller picture, calculate the indicator running multiple scenarios that envision best-, moderate- and worst-case circumstances for receiving additional liquid funds.
For more information, contact Dan Omahen at email@example.com or 312.670.7444. Visit ORBA.com to learn more about our Not-For-Profit Group.