SoCal weather and your NPO

What ever happened to Christmas Club accounts?

I read somewhere that mostly credit unions offer them now. Honestly, I haven’t had one since the early 80’s. It sure was a good feeling, going into my bank every payday and making my $25 deposit. The interest was negligible, if at all, but the peace of mind it gave me, knowing my money would be tucked away from me, albeit at least until just before Thanksgiving, made me feel empowered, grownup…. responsible.

Now, I’m not a spendthrift—it’s against my frugal nature. So it’s not like I needed a Christmas Club account to financially discipline myself. I had a savings account as well. But there was something about planning for a specific financial occasion that made me better able to deal with the unexpectedness of life.

My youngest daughter had an encounter with just such an experience recently. She’d planned a trip out of state to attend a scholastic conference and while much of the trip was not at her expense, she was growing weary of my constant questions about her ability to meet the financial surprises that inevitably pop up, especially when you’re far from home.

I went through the standard checklist with her: travel (check), accommodations (check), meals (check), ground transportation (check), spending money (check).

Even with that, I thought she should have a few extra dollars on her to cover whatever we’d inadvertently left off the checklist. She thought I was being my usual worrywart self (sometimes accurate), but I thought I was sufficiently justified, since she hadn’t traveled out of state by herself before.

Well lo and behold, as she was checking in, the hotel clerk advised her that a $50 fee for “incidentals” would be charged against her card for each of the days she would be a guest. This would accrue to $150 in total, way over the amount of money she’d allotted for such unexpectedness.

By the time she told them the hardship it would cause, the card company had already put a hold on her card, so for the next week she’d be without her funds. Ever the resourceful one, she worked out some way to survive the deficit nonetheless and I’m sure as many things are with twenty-somethings, this will all be a fleeting memory by the time the funds show back up on her account.

If only such “incidentals” could be so easily overcome in the worlds many of us live in, especially the nonprofit ones. Okay, okay, I already hear what you’re thinking: “We can barely find money to fund today’s needs, much less tomorrow’s,” right? But isn’t that all the more reason to make a conscious, deliberate effort—even policy—to do just that?

The first people in your organization that need to be convinced of this are members of the board. Operating reserves—unrestricted, liquid surplus funds available for use in the case of unexpected cash-flow shortfalls—need to be planned for. While 3 to 6 months in reserve funds is the common rule of thumb, the more accurate assessment is probably one that your organization devises for its own unique situation.

Your organization’s leadership must have the collective will to create and enforce written policy that requires that at least a portion of an annual surplus of operating funds be created and allotted for reserves and be allowed to grow over time. This funding will most reliably come from a disciplined approach to annual budgeting; waiting for money from an unexpected windfall or property sale doesn’t put control in your hands.

Worse yet, consciously deciding that planning for an unforeseen inevitability is something you just can’t afford flies directly in the face of the fiduciary responsibility the board holds to ensure your organization’s financial future.

Look, even the folks in Southern California know that contrary to singers Albert Hammond and Tony! Toni! Tone’! it does rain there, so trust and believe, they carry umbrellas, just like the rest of us.

Get and stay prepared for your impending rainy days by learning more about operating reserves through these resources, “Nonprofit Operating Reserves Initiative (NORI)” and “Operating Reserves for Nonprofits”, then share your thoughts and suggestions on how your organization can or has started its operating reserves fund.