With so much uncertainty as to when the pandemic will end, nonprofits may be tempted to use their reserves to stay afloat. Before tapping into these resources, consider the purpose and application of funds carefully. Will you use them to fund a short-term deficit? Or, are you going to use them for a long-term, revenue-generating plan?
Because the entirety of the economic impact also remains unknown, using reserves to fund short-term cash flow gaps can leave your nonprofit exposed. Avoid leaving your organization with so few resources that it’s in a precarious, or even dangerous, position post-pandemic.
Have open and honest discussions with the board about the plan for reserve use. Strategizing different options beforehand could help set your nonprofit up for success in the long term.