Subscribe to my newsletter EDM News
When do you use your rainy day fund?

Most well-managed associations  have an “operating reserve,” which is “rainy day” money set aside for unexpected cash flow emergencies. A common target is three to six months of operating expenses. The idea is that if revenue completely stopped coming into the association, you would still have at least three to six months of cash to operate on.

What is less common is associations having clear policies for when these reserves can be used. My wiser clients will use these funds when an important but unbudgeted item arises (e.g., the need for a new association management system). But too often, associations will sit on the reserve fund as if it is completely untouchable. Even during the financial crisis of 2008 (which affected associations in 2009), many associations chose to lay off staff and cut programs rather than dip into their reserves.

If an economic crisis is not reason enough to dip into reserves, what is?!?

So ask yourself: When do we use our rainy day fund? What activities will justify its uses? Is it only for use in case of calamity, or can they be used for “smaller” but important unbudgeted programs? Each association has to decide for itself, but the policies should be clear and the money should be used when it is merited.

About author:

Leave a Reply

Archives

Sign-up for EDM News

 

 

Testimonials

“Wes was able to come in and offer tangible, relevant advice that made us more productive immediately. I value his understanding of databases but more so, his understanding of how nonprofits work. There was no lost time educating him about how membership organizations are “different.” Wes recommended changes in processes as well as tips and tricks that were easy to implement made an immediate positive impact.”

Mary Pat Paris, Executive Director
International Registration Plan

“We came to Wes because we were very frustrated with our existing AMS and we wanted to improve our capabilities as soon as practicable. Wes very quickly helped us through a process of identifying our needs, identifying potential vendors, and selecting a new system that we’ll be able to move into very quickly. I especially appreciated Wes’s candor about our processes as well as the systems we were looking at. He was a great resource to have in a period of high anxiety for our organization. I would highly recommend Wes for any similar project.”

Jack Chiasson, CMP Executive Director
National Association of Life Brokerage Agencies

“Wes was able to come in and offer tangible, relevant advice that made us more productive immediately. I value his understanding of databases but more so, his understanding of how nonprofits work. There was no lost time educating him about how membership organizations are “different.” Wes recommended changes in processes as well as tips and tricks that were easy to implement made an immediate positive impact.”

Mary Pat Paris, Executive Director
International Registration Plan

Mary Pat Paris
International Registration Plan

“This is the second database implementation we’ve done since I have been at Western Arts Alliance (WAA). The first I did on my own. This time we engaged Wes Trochlil as our database planning consultant. Let me tell you, this process is a whole lot easier having Wes on your team! For a small association like WAA, it’s tempting for board and EDs to question the justification and expense of a database planning consultant. But it’s the small associations that need Effective Database Management the most. Wes strengthened our planning process, clarified our needs requirements, helped us steer around solutions that couldn’t meet our objectives, and saved us money in the long haul.”

Tim Wilson, Executive Director
Western Arts Alliance

Tim Wilson
Western Arts Alliance
%d bloggers like this: