Let me start by stating that Robert is a renowned personality who has immensely contributed to the well being of the human society at multiple occasions. Professionally, Robert runs an NGO and in the process deals with many cross cutting issues relating to – poverty alleviation, children education, drug abuse, women empowerment, and HIV-Aids etc.
Considering the social objectives of Robert’s NGO, majority of his projects are being funded by various international donor agencies. In order to avoid any mix-up, the NGO maintains separate ESCROW bank accounts for each project enabling them to record project wise details of revenue and expenses.
The funding cycle also differs from one project to another. Under certain projects, the entire funding amount from Donors is received in the beginning itself, while under some other projects the funding is received in different trenches. Once money is received under a particular project it gets deposited into the respective project’s bank a/c.
Similarly whenever there is any authorized expenses are to be made, money from the corresponding project a/c is withdrawn. Each project follows different implementation time-lines ranging from one year to five years. During our luncheon meeting Robert appraised me on various projects being implemented by his NGO.
He impressed upon the importance of ‘value for money’ and proudly stated that the NGO while implementing a project believes in maintaining a very high level of transparency and also apply due caution while spending every penny related to a project. Robert’s explanation impressed me a lot and I got more interested into the NGO’s current style of functioning.
This is when I started posing some key questions to Robert relating to day-to-day funds management as practiced at the NGO. Robert gave me a simple answer that their focus is not to make money out of the available money but to use it judiciously in order to implement the identified projects, thereby fulfilling social objectives.
This explanation of Robert provided me a perfect opportunity to question the practiced funds management approach. After intense discussion on the subject, what I observed was that millions of shillings were laid into different projects’ bank accounts, literally earning nothing or a negligible return. There are instances where money remained unutilised for months together as dormant in a project account without earning any recognizable returns.
It was difficult for me to sum-up the whole discussion which I had on the subject but on a parting note I stated to Robert that “Your money is just gathering dust!!” Robert was taken aback after hearing my concluding remark and started thinking as to what was wrong with their funds management practice. A normal human being would rather say that I am unnecessarily questioning Robert as there seems to be nothing wrong.
Is that so? Let us reach a concluding end logically after understanding the concept of ‘time value of money’. Assume you have just received a mail with the following text: – Congratulations!!! You have won a cash prize! You have two payment options: (1) receive $10,000 now OR (2) receive $10,000 in three years. Which option would you choose and why? If you’re like most people, you would choose to receive the $10,000 now.
After all, three years is a long time to wait. Why would any rational person defer payment into the future when he or she could have the same amount of money now? For most of us, taking the money in the present is just plain instinctive. So at the most basic level, the time value of money demonstrates that, all things being equal, it is better to have money now rather than later. But why is this?
A $100 bill has the same value as a $100 bill one year from now, doesn’t it? Actually, although the bill is the same, but “you can do much more with the money if you have it now because over time you can earn more interest on your money”. This is what exactly was found missing at Robert’s business place.
When the money is not immediately needed under a project, why to keep it idle, rather invest it during the interim period such that it can generate returns. The above stated case of Robert is not an isolated one, but it could have some resemblance with few of us. Isn’t is true that some of us maintain multiple bank accounts and with passage of time even lose track of the money laying into some of these non-operative accounts.
Remember, the money is there, but is it earning returns or merely gathering dust? The answer is obvious, and thus the need of the hour is to seriously introspect and make serious efforts to identify whether certain portion of your hard-earned money is just gathering dust somewhere, instead of generating lucrative returns for you or your business. Now the ball is in your court – either allows it to remain dormant or bounce it back with full force, the choice is yours!!!