Nonprofit Resource Connection Newsletter
Third Quarter 2010

FAQ: What are the Characteristics of Financially Healthy Nonprofits? Maltee McMahon, Nonprofit Resource Specialist, Bremer Bank Wisconsin

Seven characteristics of financially healthy nonprofits according to All the Way to the Bank by Larson Allen are:

1. Have sufficient financial resources to ensure stable programming.
   
2. Have a ready source of internal cash – or access to cash – in times of shortfalls.
   
3. Are committed to income-based, rather than budget-based, spending.
   
4. Retain a positive cash fund balance at the end of the year.
   
5. Accumulate annual surpluses to use as a safety net in years when an unforseen deficit does occur.
   
6. Have established – or plan to establish – an operating reserve to finance cash shortfalls and program growth.
   
7. Have a board of directors and management that hold themselves responsible for the financial stability of the organization.

For more information, check out the book, All the Way to the Bank, Smart Nonprofit Money Management by Larson Allen, (second edition)