Budget Categories

Posted on January 26, 2016 Written by

4F8K4ADXK8

Church budgets have only three categories: buildings, staffing, and programming. The following analogy is not exact (no analogy is) but is useful for illustrative purposes.

  • Buildings are the skeleton of a church
    • Facilities and grounds contain many, but not all, the activities of the church. This is the place where society expects to find members. This is the place that is considered by everyone to be a safe place, a sanctuary from the world.
  • Staffing is the heart and brains of a church
    • Personnel are what decide the vision and leadership of the church. The staff guide the volunteers to do more, worship better, reach out to others, learn deeper, and care more thoroughly for others.
  • Programming is blood and muscle of a church
    • The activities of the church provide the energy and excitement; they demonstrate to the world what the church is all about. The programs, mission trips, worship services, educational activities, outreach efforts are the tools the church uses to attract and retain others.

Too often I’ve seen churches decide to reduce one of the three (typically, programming) without understanding the full consequences of their actions. Reducing programming can leave the church paralyzed. Not having a building can cause the church to lose its relationship with the community because it can meet elsewhere anytime it chooses. And not having staff (or having little staff) could mean having nice facilities & volunteers but they are aimless.

Think about the synergy of all three. They are a tripod which support each other and the purpose of the church. But if one of these is weaker or stronger than the others, the church can get lopsided.

 

Lead On!

Steve

Filed Under: accounting, budget, church finances, leadership, strategy Tagged: , , , ,

Vanguard Stories

Posted on January 19, 2016 Written by

0P6FVF3Q5L

Vanguard is a financial investment company based in Philadelphia, PA. They didn’t pay for this blog post.

In 1997 I attended a conference in Bryn Mawr which is a suburb of Philly. The first evening of our conference there was a reception for the 100 of us at a member’s home. It was a nice, but not large, house but inside was tastefully decorated with original art and sculptures. Before we went, I asked a friend to tell me about the owner of the house. He looked incredulous and said, “John Bogle, the founder of Vanguard.” I was pretty naïve and that didn’t ring a bell at all. Lunch the next day was hosted by the Presbyterian Women. I noticed that the woman who served us the night before was walking around with pitchers of tea and water refilling glasses of the conference participants. That was Mrs. John Bogle doing what she enjoyed, serving others.

In the years since I’ve learned a lot about Vanguard and I now have all my investments with them where they’ve done quite nicely. I also read one of Mr. Bogle’s books. I encourage my family and the churches I consult with to have accounts at Vanguard.

I noticed this about Mr. and Mrs. Bogle is this: they are quite humble and seek to find ways to serve. Even though this couple is worth a lot of money, they are generous with their home and time. My professional experience with Vanguard says that they have instilled those values in the company they founded. Customer service at Vanguard goes out of their way to help.

I’ve worked with other high net-worth individuals and families and noticed the same traits: humility, gratitude, generosity, openness, and rarely seek the limelight. I encourage pastors to minister to high capacity donors because these members have the same human needs as everyone else but too often society sees them only as a checkbook.

If pastors would set aside one hour a week to meet individually with the top 20-25 donors and talk about their pastoral needs, some of those high net worth individuals may do what comes naturally to them – be generous with their church. Pastors should never have meetings with ulterior motives (to gain money), but they must absolutely never avoid meeting with the rich. Many high capacity donors would feel honored to have an hour of the pastor’s time and I can assure the pastor, you’ll learn a lot about leadership by just being with them.

 

Lead On!

Steve

Filed Under: budget, church finances, leadership, strategy Tagged: , , ,

Church Custodial Management (part 7 of 10)

Posted on December 24, 2015 Written by

Create room layout templates to be used with room requests

  • Have a graphic designer create a page with various room setups, and label each setup.
  • That page should be available online and in the office so that anyone who asks for a room can also select the appropriate arrangement of tables and chairs to meet their needs.
  • The size of the layout will be determined by the number of people attending the event (which should also be a question in the online room request form), so the custodians can work their magic in getting the right number of tables and chairs to match the chosen layout.
  • Some of the various layout options are:
    • Solid square
    • Open square
    • U-shape
    • Lecture style with tables
    • Lecture style with just chairs
    • Circle
    • No chairs or tables

 

Lead On!

Steve

 

Filed Under: budget, church staff, facilities Tagged: , ,

10 Financial Ratios (part 10 of 10)

Posted on December 15, 2015 Written by
Startup Stock Photos

Planning Meeting

Capital Campaign

  1. Definition: a multi-year fundraising church-wide event
  2. Results:
    1. Minimum: Held every 5-10 years
    2. Purpose: Raising money for a church need (a building, debt reduction, etc) and maybe an intangible goal (a missions project or missionary support)
  3. Consequences:
    1. Capital campaigns are additional times to do member education about stewardship and generosity
    2. Capital campaigns are opportunities to receive input from members and to cast vision for the future of the church
    3. If these are too infrequent, the church can have
      1. Complacency by members about their roles in the church
      2. Deferred maintenance on the church facilities and church’s vision

Now What? So What?

  • Compare your church’s financial ratios to the optimum range for each ratio.
  • Develop a 2-3 year plan to bring your ratios in line with best financial practices.

 

Lead On!

Steve

Filed Under: accounting, budget, leadership, strategy Tagged: , ,

10 Financial Ratios (part 9 of 10)

Posted on December 8, 2015 Written by

ITA18FXIBL

Weekly Offerings to Weekly Budget Goal

  1. Definition: Divide weekly receipts by weekly goal
  2. Results:
    1. Worst Case Scenario: this should not go below 75% for more than three consecutive weeks
    2. Best Case: if this ratio goes above 125% for more than three weeks in a row, thank the church
  3. Consequences:
    1. If your weekly budget receipts drop below the weekly goal for more than three consecutive weeks without a visible reason, then
      1. Push the “Concerned” Button (but not the Panic Button just yet). Push the Panic Button when you go five consecutive weeks
      2. Tighten up on expenses and explain to the congregation ASAP about the financial situation and encourage (never belittle) them to be generous.
      3. When the financial situation returns to normal, thank the members publicly for their gifts and God’s faithfulness.
    2. If your weekly budget receipts exceed the goal for more than three consecutive weeks, determine why this happened
      1. A one-time only gift such an inheritance or bonus
      2. Increased giving by several people
      3. Several new people joining and giving

Now What? So What?

  • Compare your church’s financial ratios to the optimum range for each ratio.
  • Develop a 2-3 year plan to bring your ratios in line with best financial practices.

 

Lead On!

Steve

Filed Under: accounting, budget, church finances, leadership, strategy Tagged: , , ,

10 Financial Ratios (part 8 of 10)

Posted on December 1, 2015 Written by

E5RETXVN7R

Receipts & Expenses: Ratio of Actual to Budget

  1. Definition: Divide actual receipts and expenses to the budgeted figure
  2. Results:
    1. Annual receipts should be between 95%-100% of the budget goal
    2. Annual expenses must never exceed the annual receipts figure (unless there was a significant event in the history of the church – departure of pastor, major local employer shutting down, etc.). Based on the figure above, expenses should be 90%-95% of the budget.
    3. Annual expenses should be less than the annual receipts in order to have a positive cash flow at the end of the year. There should be a difference of 2%-5%.
  3. Consequences:
    1. Receipts: if your receipts fall outside the 95%-100% of the budget (and there hasn’t been a significant event in the church), then you may not be budgeting properly.
    2. Expenses: these can exceed revenues for one or perhaps two consecutive years but any more than that is a sign of poor budgeting or lack of control over expenses. Both are unhealthy.
    3. The difference between receipts and expenses:
      1. This should be a positive cash flow which is added to the cash reserves at the end of the year.
      2. These reserves can be used for capital investment needs in the church.

Now What? So What?

  • Compare your church’s financial ratios to the optimum range for each ratio.
  • Develop a 2-3 year plan to bring your ratios in line with best financial practices.

 

Lead On!

Steve

Filed Under: accounting, budget, leadership Tagged: , , ,

10 Financial Ratios (part 7 of 10)

Posted on November 24, 2015 Written by

RPUX05EF6J

Designated Funds

  1. Definition: The major ministry areas should have at least half their annual budget in a fund designated for their ministry. These major ministry areas are: Worship & Music, Care & Fellowship, Discipleship & Education, and Missions & Outreach.
  2. Results:
    1. Minimum: At least one-fourth of the annual budget for the major ministry areas
    2. Maximum: No more than the entire annual budget
  3. Consequences:
    1. Ministries should and must rely on their budget to accomplish the main tasks entrusted to them. If a church isn’t budgeting appropriately, then the church is setting the minister up for failure.
    2. Ministries should also have a designated fund from which they can use occasional funds to do things they didn’t budget for because they weren’t aware of these opportunities when the budget was requested.
    3. Ministers must never do aggressive fundraising for their designated funds because that can undermine gifts to the budget.

Now What? So What?

  • Compare your church’s financial ratios to the optimum range for each ratio.
  • Develop a 2-3 year plan to bring your ratios in line with best financial practices.

 

Lead On!

Steve

Filed Under: accounting, budget, leadership Tagged: , , ,

10 Financial Ratios (part 6 of 10)

Posted on November 17, 2015 Written by

Cash Reserves to Annual Budget

  1. Definition: Divide Total Unrestricted Cash Reserves by Annual Budget
    1. Unrestricted cash reserves are also known as Net Cash Assets
    2. Unrestricted cash reserves do not include donor designated funds, only monies the church has complete spending control over; these reserves can include building reserves and emergency reserves
  2. Results:
    1. Minimum: One month of the annual budget; e.g., if your annual budget is $1,200,000 then you should have at least $100,000 in reserves.
    2. Maximum: Three months’ of the annual budget. Any more than that then you can be considered hoarding and not spending money on God’s mission for your church
  3. Consequences:
    1. Not having sufficient reserves can lead to financial hardships if you have a major building system need (roof replacement, air conditioner or heating system failure, plumbing disaster, etc.).
    2. Having too much in reserves can lead members to give less because they feel “the church doesn’t need my money” or the church is hoarding money.

Now What? So What?

  • Compare your church’s financial ratios to the optimum range for each ratio.
  • Develop a 2-3 year plan to bring your ratios in line with best financial practices.

 

Lead On!

Steve

Filed Under: accounting, budget, leadership Tagged: , , ,
« Previous Page
Next Page »