Seven Characteristics of Financially Healthy
by The Stevens Group at LarsonAllen, St. Paul,
The financially healthy organization has sufficient income to ensure stable programming.
The financially healthy nonprofit has an internal source of cash or ready access to cash in
times of shortfall.
Financially healthy nonprofits engage in income-based, rather than budget-based spending. Income
based budged: A. Begins with realistic income projections. B. Determines realistic costs of next
year's service delivery through: Analysis of last year's costs; Consideration of current market
conditions; Functional cost allocation.
At the end of each year, the financially healthy organization retains a positive cash fund
In years where a deficit does occur, the financially healthy organization has accumulated
surpluses sufficient to cover the current year's deficit.
The financially healthy organization has established (or has plans to establish) an operating
reserve to finance growth and cash shortfalls.
The board and management of financially healthy nonprofits hold themselves responsible for the
financial stability of the organization.
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