By Darren Key and Mike Kocolowski
Managing church finances can be like preparing for a hurricane—it’s best to have a plan in place before the wind starts to spin. That way, if the worst-case scenario develops, you’ll be prepared to weather the storm.
Faith and Finances
We have consulted with hundreds of churches on financial issues over the last three decades, and we know that managing a church’s cash flow is tricky. Seasonal cycles, unexpected events, and the inherent irregularity of income and expenses add to the complexity. For these reasons, keeping ample reserve funds is critical to your church’s financial health. It’s a sign of prudent stewardship.
While it’s true that “the Lord will provide,” and God specializes in meeting our needs in all kinds of circumstances, Scripture gives numerous examples of godly people who prepared for future financial needs. Joseph stockpiled grain for a coming famine (Genesis 41:49), Solomon described the “ant” storing and harvesting provisions (Proverbs 6:8), and David provided resources for constructing the temple with tons of treasures he had tucked away (1 Chronicles 29:3). Saving for the future (within reason) is not a lack of faith; it’s a sign of wisdom.
Simple Steps
Trying to manage your congregation’s income and expenses without a practical budget in place is like building walls before laying a foundation. Creating a realistic budget is a critical first step. Yes, the human element complicates matters—even couples happily married for decades might disagree on how money should be spent. It is naïve to think that 12 staff members, 7 elders, 10 deacons, and your church’s largest donor will all come to complete consensus on how to spend every dollar. In the budget-creation process, compromises are inevitable.
After a budget is approved, roles must be assigned. Who will monitor balances and review statements for the church’s various accounts? Who signs the checks? If the church has a credit card, who has permission to use it, and what controls are in place to ensure it is being used according to policy? What happens if the new church van costs $5,000 more than the budget line item? What type of financial scenarios would trigger elder notification? Chaos and tension will arise in the absence of clear fiscal policies, so do not overlook this step.
Once you have approved a budget and assigned the necessary roles, consult your church’s recent history and how seasons and events impact cash flow. If attendance and offerings tend to drop in the summer and increase in the fall, or if your church typically sees a large bump in year-end giving, you won’t be surprised when it happens again. If significant annual events—such as a fall festival, Easter program, evangelism campaign, or new programming launch—create large one-time expenses, you’ll know those things are coming. This type of information is crucial to the master financial plan.
Weathering the Storm
When things are humming along, unfolding according to the plan, it’s easy to feel comfortable. But what happens when a series of events disrupts the smooth flow of income and creates a cash-flow challenge? When is concern warranted, and what action steps are advisable?
First, based on our experience with churches, we recommend keeping one month’s operating expenses in a checking account, and a minimum of two months’ expenses in a liquid (cash) savings account, earning interest at a fixed rate (preferably at a financial organization aligned with the church’s mission).
If your church’s account balances fall below levels we recommend (see accompanying chart), you have cause for concern—a financial storm may be approaching. We call this “Watch” status. When savings evaporate and you have only two to four weeks of operating expenses left in the checking account, we call this “Warning” status. Finally, if the checking account balance drops to a level that covers two weeks of expenses or less, a state of “Emergency” has arrived.
Tough times require tough decisions, so it’s best to take corrective measures. However, first determine why the cash-flow situation is approaching the danger zone. Are you experiencing an unexpected drop in attendance or has giving declined because of some change at the church? Is a macroeconomic issue or problem with the local economy to blame? Did a natural disaster inflict costly damage to the property? An awareness of the root cause of the situation can help determine your next steps.
Difficult Decisions and Course Corrections
Sometimes a capital campaign guided by a competent professional is the correct prescription; other times a one-time appeal for funds makes sense. If your campus is underutilized, your church may need to consider selling a portion of the property (or the entire building). You might need to delay nonessential capital purchases or postpone a staff hire. Or maybe the church is at the point where drastic cuts must be made immediately. These decisions are never pleasant, so stay focused on the goal and remember what’s at stake.
If you ever find yourself in the direct path of an approaching hurricane, you might have the option to flee to safety. If you find yourself in the eyewall of a financial storm, however, you can’t run. But you can pray. You can fast. You can seek wise counsel. You can trust the Lord will provide. And you can prepare by making sound stewardship decisions that honor God and help build his kingdom.
Darren Key is a certified financial planner and the chief executive officer of Christian Financial Resources. Mike Kocolowski is a certified fund-raising executive and the chief operating officer of Christian Financial Resources.
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