Cash Reserves Survey
Rick Spradling
22 October 2000
________________________________________________________________
Date: Sun, 22 Oct 2000 13:27:43 +0200
Reply-To: Richard Spradling <R.Spradling@AIS.AT>
Sender: Headmasters List at International Schools <HEAD-NET@TC.UMN.EDU>
From: Richard Spradling <R.Spradling@AIS.AT>
Subject: Liquid Reserves Summary
Comments: cc: "Probst, Dietrich" <d.probst@ais.at>,
"Kollisch, Richard" <r.kollisch@kolomanhandler.com>,
"Fitzpatrick, Mark" <FitzoKuda@compuserve.com>,
"Kollisch (home)" <r.kollisch@netway.at>,
"Fitzpatrick, Mark" <FitzpatrickMT@state.gov>
To: HEAD-NET@TC.UMN.EDU
Thanks to those of you out there who responded to my query about how
much such a school keep in relatively liquid reserves. The responses
were quite varied, as might have been expected, and the definition of
"liquid" was somewhat flexible. But here, for what it's worth, is the
summary of responses:
--for those expressing a recommendation in terms of budget amounts, the
range was from 3% of income (about $300K for that school), to 10% of the
operating budget, to 25% of operations to 50% of operations. The most
common response in this fashion was probably the 10-25% range of
operating costs.
--for those expressing a recommendation in terms of months of budget
operations, the range was from 2 months to 2 years (the latter meaning
an ability to cope with two years of declining enrollments, while the
lower figures were meant to cope with a school closure). The most
common response in these terms was probably 3 months.
--responses clearly varied depending on the school's location and
external threat level. That is, where school closure was a distinct
possibility, schools calculated their total obligations (contractual
salary payments, repatriation costs, etc.) and used that total for their
target.
--in areas where closure was less likely, the calculation was based on
dealing with a temporary downturn in enrollment, allowing the school to
continue operating its programs without major sacrifice for a specified
period. In these cases, reaching a precise figure was not realistic.
--suffice it to say that many schools reported that they have these
figures as targets but are not yet able to meet them, due to financial
constraints; still, having a target was useful for all schools, it seems
In summary, if it is possible to see some sort of synthesized response
from this varied data, it would be something in the range of 2-3 months
or 15-25% of the operating budget as a desirable target for reasonably
liquid (though not necessarily cash) reserves. The rest of your reserves
you can invest in hi-tech stocks on the Nasdaq (just kidding!).
My favorite response from one of our colleagues who shall go nameless:
"In terms of reserves, I make sure there are sufficient funds to pay my
salary to the end of my contract." (This, too, was a joking reply...I
think).
Thanks again,
Rick Spradling