Have you heard that a not-for-profit should not make a profit? Crazy, right? What happens if an organization ends every year without a profit? One obvious answer is that the organization will begin the next year with no available cash to operate, because there have been no profits to provide for the opportunity to build cash reserves for unforeseen events. And one thing we are all learning, there are always unforeseen events! So when should a not-for-profit organization make a profit? Answer: Always!
Now that might sound like a lofty goal to some organizations. It is a struggle to break even! It might also sound confusing to some board members and donors. Why are they asking for financial support when they have resources that are not being used? Yet, this type of thinking is very short sighted - especially when considering the future long term goals and sustainability of an organization. At Meaden & Moore, we view our not-for-profit clients as businesses and a healthy business operates effectively, efficiently and profitably. In the case of profitable not-for-profits, surplus cash helps to create reserves, enables the payment of timely expenses, and most importantly helps to avoid the panic and desperation that accompanies financial stress. It is more difficult to focus on mission goals, client service, and community outreach effectively when there are impending financial worries.