As an industry we must start talking about working capital. It’s something few arts journalists spend a lot of time writing about unless there’s a major bankruptcy, which is too late. That’s why I found this blog post, “Report Shows Precariously Low Cash Reserves for Most Arts Organizations,” particularly interesting — and frightening.
Working capital is often defined as the amount of money your organization has on hand for continued operations. It is typically measured in months or years. We all know that the vast majority of arts organizations have a threadbare financial situation, and this blog post documents that situation well. In the performing arts, many organizations spend next year’s subscription money on this year’s expenses, which is an accountant’s nightmare and a devil’s bargain for many organizations.
The blog post posits a few specific things that organizations and their boards should be doing to ensure a better financial underpinning, all of which I agree with. I won’t recount them here, but I hope you’ll take a moment to read them. Read the Article