This content is adapted from information provided by the Community Accounting National Network.All organisations should aim to have some money held in reserve. Organisations have been criticised in the past for accumulating too much in reserve and not spending it on achieving their objectives. For small organisations, however, finding enough money to create any reserves at all is likely to be a bigger problem.
What level of reserves?
There is no set figure, but it is widely accepted that the general or uncommitted reserves should be maintained at a level approximately 25% of your organisation’s average annual expenditure. Some would say that this is the minimum, and that to have less is too risky.
Each organisation should consider its own situation:
- How secure is your future income?
- What is the value of your obligations under any contracts?
- How much would it cost you to close down?
This page is a summary of information contained in the full online toolkit.
