Creating a Reserves policy
“Reserves” is used to describe that part of an organisation’s funds that are freely available to fund its general operations and so is not subject to commitments, planned expenditure or other restrictions.
A reserves policy helps you to:
- properly manage your resources.
- plan and formally report your resources to others.
- match your reserves to what your group needs and no more, otherwise your group would hold reserves that are too high or too low for its needs.
Here’s some tips to help you think about around your Reserves policy.
Write your Reserves policy so that it covers:
- The amount of reserves.
- The reason(s) why your group needs this level of reserves.
- How your group intends to maintain the reserves at the amount agreed by your Management Committee or Board of Trustees.
- How often the members of your Management Committee or Board of Trustees will review the reserves.
Set your Reserves by considering the following (where appropriate):
- The cash flow and your cash flow forecasts for the year.
- The funds and reserves you have at the minute.
- Your potential income streams in the future.
- The funds you have needed over the last couple of years.
- The major risks that exist for your group and the impact of these.