5

Minimum Balance

Also referred to as "Minimum Closing Balance".

A decision by the owners to avoid depleting the reserve account by always keeping a specified amount of money as the reserve balance at the end of each fiscal year. This ensures that some funds are available for emergency purposes. 


Examples
Listed below are some examples of the application of a minimum balance:

  • We have a policy to keep a minimum of $15,000 in our reserve account at all times.
  • After we completed our reroofing project, we had a balance of $40,000 in our reserve account. 

Determination
The appropriate size of the minimum balance each fiscal year will depend on various factors, including:

  • Ongoing cash flow requirements for capital projects.
  • The size and proximity of the projects within a deemed planning horizon.
  • The size of the insurance deductibles, such as the water damage deductible.
  • A percentage of the annual operating budget.
  • A review of the forecast inflows and outflows over a planning horizon deemed adequate by the owner group.
  • Funding Level
  • The deemed level of underfunding.
Cash flow table
Fig. Cash flow table.

Cash flow table showing inflows and outflows of monies.
Fig. Cash flow table showing inflows (green) and outflows (red) of monies.

See also:



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