[MainstreetManagers] Reserves

[Kelli Yadon]

I thought I would put this here instead of on the FB group but will post there as well if you want me to...


Most nonprofit leadership groups recommend at least a 90 day cash reserve. This does not have to be in a separate account, but it might help the organization keep it in reserve. Ninety days of cash would allow a nonprofit to continue operations while receiving no sources of income. A method of arriving at this number is to research your last 12 months total expenses and divide by 12, to get you average monthly expenses. Multiply this number by 3 (3-months) to determine your estimated cash reserve need. If for some reason, your last three months expenses have been higher than normal, simply use the last three months total expenses as your estimated cash reserve need.



Secondly, there can be questions about increasing this reserve for more than three months. It is entirely a board of directors decision. The tension will always be the balance between a cash reserve and the reaction of funders seeing a large amount of cash. Will funders help fund the organization that has too large a cash reserve? Larger reserves beyond 90 days usually requires deeper discussions with funders. Again, it is a board decision, but every organization is wise to have at least 90 days of cash reserves.


Hope this helps!

Kelli S. Yadon
Oklahoma Main Street Center
900 N. Stiles Ave.
Oklahoma City, OK  73104
c: 405.778.9375
o: 405.815.5379
800.879.6552 (toll-free)


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