You may have noticed a line item on your bank statement that’s looking a lot better than in years past; that’s right, interest is back!

The zero-interest-rate world is well behind us and savers are finally being compensated again, so now is the right time to make sure your banking relationship isn’t short-changing your non-profit.

While rates have risen across the board, bank savings and CD rates may still seem a tad underwhelming. In addition, the current rates offered by your bank or financial institution may not be competitive. If you’re reading this article and have not evaluated the rate of return on your financial assets and have not shopped around with other banks and financial institutions to compare rates being offered, you’re definitely late to the game at this point.  But the good news is that there is still time to act.

For organizations with minimal amounts of operating funds sitting in cash reserves, it may not be worth the effort to search for a percentage point or two of higher return. But those sitting on large balances may want to look around because those seemingly small increases can really pay off.

Getting higher returns does not require taking excessive risk. In fact, you can lend money to the US government at a 4-5% rate of return (see below chart). You don’t need to worry about being paid back (Uncle Sam’s good for it), and the only concern is inflation—which would be eating away at cash reserves, regardless.

Another thing you will want to consider is protecting your money. In early 2023, we did see some bank failures. Ensuring your money is protected in an FDIC-insured account will provide protection in the event of bank failure.

If your non-profit doesn’t have a brokerage account, it may be a good time to consider one. A brokerage account opens additional investing avenues, offering more potential income with minimal additional risks, from brokered CDs to treasury securities and money market funds.

Additionally, a brokerage account provides the ability to receive highly-appreciated securities—another way for donors to contribute. And should you be well-funded and capable of investing over a longer term, you’ll have access to a much wider array of investment options.

A healthy banking relationship can be quite valuable, and interest shouldn’t be your only consideration. But rates have moved meaningfully and it’s certainly worth a second look.

If you’re looking to invest excess cash in stocks, bonds and other types of financial instruments, you’ll want to understand the risks associated with such an investment.  For starters, you will want to define the organization’s investment objectives, its risk profile and tolerance and as a best practice, develop an investment policy. In developing the organization’s investment policy, you will need to consider how you will protect the value of the invested funds while growing them in a safe and responsible manner in line with the organizations risk tolerance and considering the ability to access these funds in the future.

As you can see, there is a lot to consider when putting your excess operating cash and cash reserves to work for you. Having a well-defined investment strategy and policy is key to managing risk. Investing the time to discuss and document the organization’s risk appetite and strategy will help steward the organization towards a successful fiscal outcome.

DISCLAIMER: This advisory resource is for general information purposes only. It does not constitute business or tax advice and may not be used and relied upon as a substitute for business or tax advice regarding a specific issue or problem. Advice should be obtained from a qualified accountant, tax practitioner or attorney licensed to practice in the jurisdiction where that advice is sought.