In Fall 2019, we launched a new feature called Ask a Community Vision Consultant. Over the last several weeks we’ve heard from many nonprofit leaders who reached out with questions on how to best navigate the impacts of COVID-19 on their organizational sustainability.
The Question
We are experiencing extreme cash pressures due to COVID. I don’t know if we will be able to retain our staff through this and on the other side. What should I do?
The Answer
Since we launched our COVID-19 Rapid Response Technical Assistance program, we have received many questions like the one above. We are not HR professionals and will never provide advice about how to handle an HR issue, however we have many financial management tools that can help guide clients toward finding an answer for themselves. Our newest tool is a Financial Decision-Making Roadmap designed to support nonprofit leaders through the uncertainties of COVID-19 and beyond. We see this tool as timeless because, regardless of the external landscape, nonprofit financial decision-making is a constant, and the future is always difficult to predict.
In the case of the above question, the Financial Decision-Making Roadmap can help provide a clear, objective, step-by-step pathway through a situation fraught with stress, anxiety and fear.
The first step is to calculate Days’ Cash. This is equivalent to how many days an organization can sustain its operations with no new cash coming in. This measurement helps translate “cash pressures” into an actual number. If Days’ Cash is over 90, the organization has some breathing room. If Days’ Cash is under 90, the organization can try a more flexible version of the same measurement that includes additional cashable assets like receivables and lines of credit.
After calculating these and other liquidity indicators, and completing a cash flow projection, the organization will be in a strong position to evaluate different staffing scenarios with the Scenario Planner, the next key step in the Roadmap. An optimistic scenario could look at remaining fully staffed; a moderate scenario could show temporary changes; and a conservative scenario could examine permanent staff reductions. In the consolidated tab, all three scenarios are shown side by side for easy comparison and evaluation.
Each box throughout the Roadmap links to a free, on-demand, downloadable template on Spacesforgood.org, a platform managed by Community Vision, so clients can move through the process at their own pace. We recommend working through the Roadmap as a financial leadership team, whether that be as a staff or in collaboration with board members. The team can then use outputs from the various ratios and scenarios in this tool as a structured way to guide group conversations about what may be very difficult financial decisions in our current environment.
There is no silver bullet to surviving and thriving through COVID-19, but by approaching the urgency of the situation with strategic, methodical thinking, organizations can bring clarity to their decision-making process.
The Financial Decision-Making Roadmap provides a tangible way to cope with an intangible reality. If you have a question you would like to discuss with one of our Consultants, schedule a time to talk. We would love to hear from you!
