Strategies For Cash Reserves Management

You see $250,000 in your bank account. Feels great. But is it? Whether that number is $10k, $250k, $250M, we know nothing from the “number.” Here is the hard truth: Most business owners have no idea how to actually translate what their number means. How much is already spoken for or safe to spend? If you do not know, you are not alone. So, how do you change this? 1. Start doing a 13-week cash flow forecast weekly 2. Set aside cash each month I like to think of cash in 3 buckets: 1. Operating 2. Reserve (emergency funds) 3. Strategic By doing a 13-week cash flow forecast, you start to actually understand where your money is going. By labeling and setting cash aside, you create a more resilience in your business. These are simple, but not easy… not easy because it requires discipline to stick to. But only then can you truly understand the real financial health of your business. It’s time to stop operating in the dark.

New client? The first model I build is 𝙣𝙤𝙩 a Three Statement Model... Instead, it's a 𝗖𝗮𝘀𝗵 𝗙𝗼𝗿𝗲𝗰𝗮𝘀𝘁. ~~~ 📌𝗦𝘁𝗮𝗿𝘁 𝗼𝗻 𝘆𝗼𝘂𝗿 𝗼𝘄𝗻: grab a personal cash flow template here 👉 https://lnkd.in/edmwgYCv ~~~ 𝗧𝗶𝗺𝗶𝗻𝗴? 13 weeks, 4 weeks, 7 weeks? Doesn't matter. I just need a general sense of what cash will do in the short term. When will I collect payments? Can I pay vendors? Can I make payroll? 𝗔 𝗙𝗿𝘂𝘀𝘁𝗿𝗮𝘁𝗶𝗼𝗻 What drives me nuts about these forecasts? They have become so overly "professionalized" that no one understands them. I just want to know: "What will my bank account look like next week?" "How about two weeks from now?" Enough of the fluff. 𝗤𝘂𝗶𝗰𝗸 𝗦𝘁𝗮𝗿𝘁 𝗚𝘂𝗶𝗱𝗲 Open a spreadsheet and whip this thing together. You build it like this: 1. Stuff that comes in -- minus -- 2. Stuff that goes out = What you have left. (repeat for next week) (💡pro tip: don't forget to add "float" to your beginning balance = checks that have been cut but not yet cashed) 𝗣𝗶𝗰𝘁𝘂𝗿𝗲 𝗧𝗶𝗺𝗲 In the example image I'm focused on three things: 1. Mapping out the past 2. Making thoughtful estimates about the future 3. Figuring out if I have shortfall (so I can do something about it 𝙣𝙤𝙬) 𝗘𝘅𝘁𝗿𝗮 𝗧𝗶𝗽𝘀 💡𝘗𝘳𝘰 𝘵𝘪𝘱 1: have unknowns? Just build a line called "unknowns" to make things conservative. 💡𝘗𝘳𝘰 𝘵𝘪𝘱 2: forecast expenses early, receipts late (again, make it conservative) 💡𝘗𝘳𝘰 𝘵𝘪𝘱 3: 𝗳𝗼𝗿𝗴𝗲𝘁 𝗮𝗯𝗼𝘂𝘁 𝘄𝗲𝗲𝗸𝘀, 𝗷𝘂𝘀𝘁 𝗯𝘂𝗶𝗹𝗱 𝗶𝘁 𝗯𝘆 𝗱𝗮𝘆. 𝗟𝗲𝗮𝗿𝗻 𝗶𝗻 𝗬𝗼𝘂𝗿 𝗦𝗽𝗮𝗿𝗲 𝗧𝗶𝗺𝗲 The best way to practice? Start with your own life: + paycheck in - expenses out Build a short forecast, maybe 4 weeks at most. How'd you do? If you were even 𝘥𝘪𝘳𝘦𝘤𝘵𝘪𝘰𝘯𝘢𝘭𝘭𝘺 close, you have the raw skills to do this analysis at the business level. 𝗧𝗟;𝗗𝗥 1. Map out history 2. Make conservative estimates about the future 3. Make a plan now ~~~ 👋 Hey, I'm Chris Reilly, and I teach Financial Modeling based on real Private Equity and FP&A experience. 📌 See Financial Modeling Courses 👉 https://lnkd.in/eG_uVhsE

Weekly cash flow forecasts usually aren't necessary unless a company is dealing with liquidity issues. Distress or rapid growth can both be a culprit. Here's how to use a monthly cash flow to back into an optional weekly forecast. This 13-week cash flow forecast is not built from the bottom up. It's built from the top down. In other words, I build the company forecast on a monthly basis and then backed into the 5-4-4 weekly allocation. How do I do this? Step 1: Forecast the P&L monthly Beginning with sales, we forecast out key customer revenue. Then we forecast out non-key customer revenue. The reason for the segmentation is to maintain strong accuracy on the forecasts that are most material. Then, based upon cost analysis, we can then forecast direct costs using a combination of assumptions related to variable and fixed behaviors. Finally, given the expectations of sales growth and gross margins, we can then forecast operating expenses to support the growth or turnaround. Step 2: Develop balance sheet assumptions In this example, I have collections of accounts receivable and payments of payables, which are all going to be driven by the P&L forecast, collection and payment terms. This helps determine the timing of cash and working capital on a monthly basis. Similar analysis should be done with capex investments, projects, hiring, professional fees, and financing. Step 3: Determine the weekly versus monthly timing It's one thing to get the timing right month-over-month. But it's another to get the timing right within each week. While most companies don't need this degree of precision, if there's a challenge around cash flow, managing weekly can bring advantages. Step 4: Create formulas that help with automation In this walkthrough, which is the first of two, I illustrate how I use header mapping to get the timing right. It's a bad use of time to spend hours each week redoing the forecast and timing everything out. Once we know the timing, we can use triggers and weightings in the data mapping to back into the weekly cash flow forecast from the monthly. 💥 If you're interested in learning more about these concepts, you can this live discussion with AFP: https://lnkd.in/gX8M-HQb

Here’s exactly what we’re telling clients to do given current market volatility…. Keep a fully stocked Emergency Fund. If you feel that a layoff is likely, consider stockpiling excess cash for a transition fund. Keep funds for short term goals out of the market. If you're nearing becoming work-optional, keep a significant portion of your portfolio in high quality shorter duration bonds so that you can draw from your bond portfolio to support income until equities recover. For long term goals, continue to invest for the long term. Market corrections are opportunities to buy equities at a discount, if you will, so continue portfolio contributions as planned. If you are deploying a large amount of cash into the market, consider whether you might want to dollar-cost-average over time. If equity compensation is a large portion of your annual income (which is the case for most of our late-stage private and public company clients), manage your spending so that decreases in your company stock price won't impact your ability to pay your bills. (This is why we often recommend a lower price point for a home purchase than might otherwise be possible to leave a healthy margin of safety for stock price drops.) If you have RSUs vesting on an ongoing basis, we generally recommend that you continue to sell shares as they vest (although there are exceptions - follow whatever Cyndi or I has laid out for you in our planning work together). This is because your RSUs are ultimately a bonus paid in stock, and we do not typically recommend using your bonus to buy your company's stock. Instead, we recommend using your RSUs to fund your goals or support your cash flow. ***This is being shared for informational and educational purposes only. This is NOT investment advice. Every situation is unique so please consult with a professional about your specific situation to see what makes sense for you.***

Businesses die when they run out of money. There is one tool to survive a cash crisis. The 13-week Rolling Cash Flow Forecast 🧵: It is a simple spreadsheet. To forecast your cash precisely by the week. For 13 weeks -- a short enough time to be precise. And just enough time to get ahead of problems. Here’s the Excel template I’ve used (link at end): Step 1: Start with this week. Enter this Monday’s date. We have a column for this week and the next 12. Step 2: Income Fill in your current starting cash on hand. Then the cash coming in this week. Step 3: Expenses List the cash that’s going out from operations. Like rent, salaries, fees, or loan payments. Step 4: Ending cash position Each week, start with the cash on hand. Bring in some more cash. Spend some. Then see what's left for next week. We want our cash to stay above zero. No cash = no business! Steps 5 & 6: Accounts Receivables and Payables Receivable = money owed to us (suppliers) Payable = money we owe (vendors) These are often on terms (like net 30), so we want to forecast when they must be paid We enter current & new ones, and due dates That’s the basic idea. You update things for the next week and beyond. Revise each week and delete the first week. So it’s always up to date for the next 13 weeks. And you can now try to avoid running out of cash. Usually, you're here because your bank account is nearly empty! So now… Your job as CEO is to stretch your cash: •Delay payments •Renegotiate w/ vendors •Expand borrowing •Raise cash •Get paid early •Etc. Buying time to fix the problems that got you in this mess! I am using this spreadsheet format now. In real businesses. As the economy gets worse, more of us will need it. You can find the spreadsheet free on my site at: girdley dot com slash 13weeks

You think you’re profitable…  But your bank account tells a different story. Managing cash flow can feel like a constant puzzle. Late client payments strain your resources, while vendor bills pile up, adding to the pressure. As a result, your business decisions slow down, and growth opportunities slip away. The constant worry about cash impacts your leadership, while delayed supplier payments damage relationships and late fees continue to eat into your profits. But you don’t need to worry more! You can fix this and master your cash flow. By two strategies: 1. Accounts Receivable Strategy: - Send invoices immediately after service - Offer early payment discounts - Set clear payment terms - Follow up consistently - Use digital payment options 2. Accounts Payable Management: - Negotiate favourable payment terms - Track due dates systematically - Take advantage of early payment discounts - Maintain vendor relationships - Plan payment schedules Think of accounts receivable as your accelerator and accounts payable as your brake. Balance them well, and your business runs smoothly. You'll transform from constantly checking bank balances to confidently making business decisions. #accountsreceivable  #accountspayable  #finance  

I just studied a Harvard Business School case on Yale University’s $31.2 billion endowment, and what I learned blew my mind: Yale mastered the art of turning money into more money at a scale most nonprofits can only dream of. Nonprofits can apply the same principles to break free from the endless fundraising cycle and create long-term sustainability. Let me show you how. A Masterclass in Smart Investing: Yale’s Investment Office, led by David Swensen, took an unconventional approach: ✔ Prioritized equity over fixed income → Returns beat inflation. ✔ Invested in inefficient markets → Higher risk, but also higher returns. ✔ Built long-term relationships with top fund managers → Consistency over market timing. ✔ Avoided large institutions with misaligned incentives → No conflicts of interest. ✔ Maintained liquidity while holding illiquid assets → Could withstand downturns without panic selling. The result? Yale’s endowment generates more in annual returns than most universities have in total assets. But nonprofits can apply these principles, too. What Nonprofits Get Wrong About Funding Most nonprofits rely on: ❌ Short-term fundraising (galas, one-off donations). ❌ Restricted grants (funders dictate spending). ❌ Chasing capital without a strategy (constant survival mode). This isn’t scalable and leaves organizations vulnerable. Enter Venture Philanthropy: The Private Equity of Nonprofits What if nonprofits took a venture capital approach to funding? Instead of one-off grants, they would: ✅ Secure long-term investments (multi-year funding commitments). ✅ Align funder incentives with impact (performance-based funding). ✅ Build strategic relationships with capital providers (not just donors, but investors). This is venture philanthropy, treating nonprofit funding like an investment. And guess what? It works. Nonprofits that adopt this model scale faster, sustain funding longer, and create bigger impact. How to Apply Yale’s Strategy to Your Nonprofit 1️⃣ Think Like an Investor → Stop fundraising just to “survive” and start raising capital to grow. 2️⃣ Prioritize Long-Term Funding → Multi-year commitments > one-time donations. 3️⃣ Diversify Revenue Streams → Private funding, earned income, impact investing. 4️⃣ Find the Right Capital Partners → Work with funders who share your vision (not just those who give the biggest check). 5️⃣ Play Offense, Not Defense → Build financial reserves, so downturns don’t derail your mission. Yale didn’t build a $31B endowment by accident. They followed a disciplined strategy, invested in high-performing assets, and prioritized long-term value creation. Nonprofits that do the same will break free from the endless fundraising cycle and create sustainable impact for decades. Want to level up your nonprofit’s funding strategy? Start thinking like Yale. With purpose and impact, Mario

A nonprofit's bank account hit zero on payroll day. The board kept saying "we'll build reserves later.” Later became never. Here's what I wish they'd known. Many nonprofit boards view reserves as a luxury - something to build after other priorities are met. This mindset puts your organization at risk. Nonprofit Finance Fund shows that 76% of nonprofits have less than 6 months of operating reserves, leaving them vulnerable to disruption. Why Reserves Matter Now More Than Ever Your nonprofit faces increasing volatility: -Government funding delays stretching 90+ days -Natural disasters disrupting operations -Economic downturns impacting donor giving -Unexpected facility repairs or equipment failures -Staff turnover requiring temporary staffing Without adequate reserves, any of these challenges can force impossible choices between serving your mission and meeting basic obligations. Here's what your board needs to understand. Reserves aren't idle money - they're strategic risk management. Just as you wouldn't operate without insurance, you shouldn't operate without financial protection. Walk through specific situations your nonprofit could face: - A key grant payment delayed by 60 days - Emergency building repairs needed to maintain programs - Bridge funding needed during leadership transition - Operating funds required during disaster recovery Every strong reserve started with a first step. Your mission deserves this protection - help your board understand why.

"We have too much cash for me to worry - I don't need a 13-week cash forecast" 💰 “It’s too much work for a short-term view.” 💰 “Our finance team already knows our liquidity position.” 💰 "We're too big of a company for that" I hear these arguments all the time. But here’s the truth: Even the biggest, most cash-rich companies in the world - Google, Apple, Amazon - still run a 13-week cash flow forecast. Why? Because liquidity isn’t just about not running out of cash - it’s about how efficiently you deploy it. Here’s why I wouldn't run a buisiness without a 13-week cash forecast: ✅ 1️⃣ Cash Reserves Mean Nothing Without Visibility - Yes, your company might have a massive cash balance - but do you know exactly where it’s needed, when, and why? - A 13-week forecast keeps you ahead of short-term liquidity risks and unexpected outflows. ✅ 2️⃣ Short-Term Forecasting = Smarter Capital Decisions - Big, successful companies don’t just let cash sit idle - they decide whether to invest, return capital, or optimize working capital. ✅ 3️⃣ Volatility Happens - count on it - Supply chain disruptions, unexpected tax liabilities, interest rate fluctuations - these impact cash faster than a P&L forecast can predict. - Your balance sheet might be strong, but liquidity missteps harm companies, even profitable ones. I get it, maintaining a 13-week cash forecast is a ton of work, but inch toward automation and put in the effort! 🔹 If a company as cash-rich as Google still relies on a 13-week cash forecast, you probably need one too. 🔹 It’s not just an FP&A or Treasury task - it’s a strategic tool for capital allocation and financial resilience. 🔹 Cash flow surprises kill companies. Knowing your runway and liquidity position in real time is mission critical Tell me I'm wrong 😂 - where are my cash forecasting gurus? #CashFlow #Finance #FP&A #Treasury #CFO #FinancialPlanning

How To Manage Cash Original Content Creator: Oana Labes, MBA, CPA (give her a follow) ---- Learn to Manage Cash. Here's why: To seize growth opportunities To protect against critical business risks To avoid financial distress and loss of business value To maximize shareholder value and return on investment. 🎯 Cash comes into a business from 3 main sources: >> Operations >> Investments >> Financing 🎯 Cash 1.0 is optimizing AR, AP and Inventory terms and turnover 🎯 Cash 2.0 is working on: >> Cash Flow Forecasting Techniques >> Effective Debt Management >> Capital Expenditure (CapEx) Cash Flow Optimization 🎯 Here are 4 critical reasons to remember for managing cash: 1️⃣ Seize Growth Opportunities: ⚫ you need agility to capitalize on acquisitions, expansions, or innovation ⚫ cash reserves may not be sufficient, so having a strategy to attract the incremental cash you need will allow you to take quick action on opportunities and give you a competitive edge. 2️⃣ Protect Against Critical Business Risks: ⚫ cash acts as a financial buffer against economic downturns, demand fluctuations, or supply chain issues ⚫ taking steps to ensure sufficient excess cash will help ensure your operational stability and strategic focus during unforeseen challenges 3️⃣ Avoid Financial Distress and Loss of Business Value: ⚫ effective cash management will prevent cash flow shortfalls, which are a leading cause of business failure. ⚫ the worst time to get other people's money (bank, investors) is when you actually need it ⚫ planning ahead will help you meet short-term liabilities (payroll, suppliers, debts) and avoid eroding business value and reputation. 4️⃣ Maximize Shareholder Value and Return on Investment: ⚫ strategic investments and operational decisions that drive long-term growth and profitability require advanced cash flow planning ⚫ managing cash effectively will always position companies favorable to generate and provide superior returns to shareholders What would you add? __________________ Original Content Creator: Oana Labes, MBA, CPA (give her a follow)