As part of the annual budget process you will want to determine as accurately as possible the amount of cash inflow and cash outflows, as well as their timing. The cash flow budget should give you a good idea of when you will have surplus cash to invest. For example, cash balances in a checking account may earn little or no interest while cash invested in a risk-free six month treasury bill can yield significant interest. Therefore, it is to your advantage to identify cash which may be invested for a longer time once you have determined your cash needs and are confident that they are covered. It is worth comparing services and yields from a variety of financial institutions before making your selection.
Some banks offer special services to nonprofits.
Others may charge higher fees because they offer services which smaller nonprofits are unlikely to take advantage of. Terms vary widely, but a short discussion with a board member, banker, financial advisor, or broker should help you sort it out quickly. Some donors, especially government agencies, require that interest earned on their monies be returned to them. When considering an interest-bearing account you should consider the net cost incurred from the combination of interest and other fees, which may include monthly service charges, per check fees, electronic transaction charges, and other fees resulting from insufficient funds and returned checks. An interest-bearing account is advantageous only if your average balance is sufficient to avoid fees, such fees are waived automatically for you, or the interest generated from your balance is consistently greater than the fees charged to maintain the account.