When I was in business school, I was sent as part of a team to a business school competition. We were given a business situation and had to propose solutions: a newspaper business was failing and running out of cash. My team focused on long-term strategies for the business in question; we were sure we had won the competition. We lost.

The judges said our long-term approach was intelligent and well-considered but we had completely forgotten the short-term. The business would have gone bankrupt before our long-term solutions were implemented.

I was reminded of that incident today when a fellow arts manager sent me an email about a shortfall her organization is experiencing. She was so focused on the long-term that she did not pay enough attention to a modest, but meaningful, short-term cash flow problem.

I believe that many of us are going to be facing short-term cash flow challenges given the current state of the economy and the likelihood that some (or many) of our donors, especially corporate donors, will pull back on their giving.

Short-term cash flow forecasting is a requirement for all arts organizations. And making appropriate adjustments to spending when grants don’t materialize is a prerequisite for good arts management.

Too many managers wait until a fiscal year is almost over before projecting year-end results. At that point, it is simply too late to do anything about it. By three months into a fiscal year I want to know where we expect to end the year. This gives me plenty of time to cut certain expenses. As those who read this blog frequently know, the last resort should be cutting artistic expenses or marketing budgets. But there are usually other elements in our budget that can be trimmed to help alleviate the short-term problem.

I am a big believer in long-term planning, but we cannot ignore the short-term.

Just ask the judges of any business school competition.