Question

If there is a cash surplus in one or more months, what could a nonprofit organization do with the surplus (give some recommendations for how to utilize or deploy those funds)

Answer 1

If there is a cash surplus in one or more months, a non-profit organization could park this money in the reserve account. It is quite common for a non-profit organization to have a shortfall of funds during certain months. In order to cover for this shortfall, the organization can tap into the reserve funds.

The reserve account could be a short term fixed deposit account. This will earn some interest as well in the short term and can be withdrawn whenever required.

It is not recommended, however, to distribute this surplus cash to the employees or the board of directors. The priority should be to use the excess amount towards the primary objective of the non-profit organization.