10 Financial Ratios (part 5 of 10)

Posted on November 10, 2015 Written by
  1. Debt to Cash in Bank
    1. Definition: Total amount of debt divided by average 3 month bank balance
    2. Results
      1. Minimum: Not to exceed 4:1 which means you have at least one-fourth of your debt in cash on hand
      2. Optimum: Less than 3:1 which means your cash on hand is one-third or more of your debt; you can pay off one-third or more of your debt immediately.
    3. Consequences: The more cash you have, the better interest rate you can get for your debt. This will be a significant savings over time. It will also help you have more peace of mind.

 

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 4 of 10)

Posted on November 3, 2015 Written by

Budget percentages

  1. Definition: determine what percent of your annual budget goes to the three categories of church expenses
    1. Building: utilities, building & grounds maintenance and improvements, building insurance, debt payments, and anything else it takes to operate the physical structure
    2. Staffing: all personnel costs regardless of where the staff is budgeted for (you may have custodians in the building budget but they are a personnel expense)
    3. Programming: all expenses related to why the church exists including worship & music, care & fellowship, discipleship & education, missions & outreach (including funds budgeted for a denominational entity)
  2. Results
    1. Building: should be about 20% (plus or minus 5%)
    2. Staffing: should be about 50% (plus or minus 5%)
    3. Programming: should be about 30% (plus or minus 5%)
  3. Consequences
    1. Building: if this is too low you, may be deferring a lot of maintenance; if it is too high, you have more building than you can support
    2. Staffing: if this is too low, you may not have sufficient staff to do the job; if it is too high, you’re not using enough volunteers
    3. Programming: if this is too low, you are cutting your reason for being; if it is too high, … I’ve never seen it too high but make sure you’re paying your staff appropriately and taking care of the building properly

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 3 of 10)

Posted on October 27, 2015 Written by

 Giving Per Adult Per Week

  1. Definition: Divide weekly budget receipts by total Sunday worship attendance
  2. Results:
    1. Minimum: $30 per person per week for a low-end sustainable ministry
    2. Optimum: $40-$55 per person per week for growing ministry
  3. Consequences:
    1. If the average is $25 or less then the church is in financial peril; the financial heathiest churches are $40+ per week and growing year over year.
    2. Chart this giving on a weekly basis to track trends and get ahead of any downturn.

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 2 of 10)

Posted on October 20, 2015 Written by

Donor Giving Curve

  1. Definition: gather 52 weeks’ of donors’ budget gifts and the ages of the donors; add the donors’ gifts into 10-year age brackets; plot the gift totals on a graph.
  2. Results
    1. Your bell curve should peak with the 50-59 age bracket
    2. Optimum: the left shoulder (20s, 30s, & 40s) should be higher than the right shoulder (60s, 70s, & 80s). Younger folk have more debt and less earnings but seniors are trying not to outlive their retirement funds.
  3. Consequences: Look at your graph and move it forward 10-15 years and determine the financial viability of your church.
    1. What will your church’s budget be like in 10-15 years and are you getting ready?
    2. Is your church too dependent on seniors so that when they stop giving your church will have significant financial difficulties?
    3. Is your church developing the younger generations by establishing expectations for them in leadership & volunteer positions and doing continual stewardship education?

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 1 of 10)

Posted on October 13, 2015 Written by
  1. Debt to Budget Ratio
    1. Definition: Total Debt divided by Total Annual Budget
    2. Results
      1. Maximum: Less than 200%
      2. Optimum: Less than 100%
    3. Consequences: The higher the ratio the less financial margin you have. Churches must have margin to hedge against financial downturns and opportunities. This is just like your home mortgage – the more you owe and pay the bank each month, the less you have to do other things.

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: budget, leadership Tagged: , , ,

How to Use Paper Towels

Posted on September 29, 2015 Written by

I really like the Purell hand sanitizers because they dispense “juice” without touching anything. By not touching anything you minimize the spread of germs. But Purell is expensive so it is typically used in critical areas (think, babies) while bathrooms use paper towels.

The US uses a huge amount of paper towels each year. The good news is that we’re washing our hands, a lot. The bad news is that we’re using a lot of paper which ends up in a landfill. Here are three steps to minimize the number of paper towels you use each time you wash your hands AND which help keep the bathroom clean.

  1. Flick your hands 10-12 times in the sink
    1. This gets rid of extra water on your hands. It takes 5-8 seconds to do this and ensures that you’re not dripping water on the counter and floor when you reach for a paper towel.
  2. Get one (1) ONE paper towel
    1. Just one. That’s all you need. Whether it is from a motion sensor machine or a manual dispenser, all you need is one. Use that one paper towel well and it will get the remaining moisture on your hands.
  3. Use the paper towel to clean up the extra water that previous people left around the sink
    1. After you’ve dried your hands with the paper towel, use it to wipe up the water on the counter around the sink. Using the towel helps keep the bathroom clean and uses up the rest of the towel.

Doing these three steps will reduce the number of paper towels you use and keep the bathroom cleaner. That helps everyone!

 

Lead On!

Steve

Filed Under: budget, buildings, facilities Tagged: , ,

Terrorism Insurance

Posted on June 9, 2015 Written by

In December 2014, Congress renewed the Terrorism Risk Insurance Act (TRIA). TRIA was created shortly after 9/11/2001 as a way of funding the insurance industry in the event of a future act of terrorism. It has been renewed a couple of times and was renewed just recently for another seven (7) years.

 

This act allows insurance carriers to automatically put into commercial insurance policies a premium to cover damages caused by terrorism. This figure is usually several hundred dollars per year for a mid-sized premium ($2-4 million in coverage). It is not an excessive amount but it is an unnecessary amount.

 

Policy holders can opt out of this terrorism insurance. Call your insurance broker and ask that the terrorism coverage be removed ASAP. It will save you hundreds of dollars a year that you’ll never recoup. There is also a workers’ comp terrorism policy and Congress mandated that employers cannot opt out of that insurance – bummer.

 

Other than the savings why would you opt out of this coverage? Because odds are you’ll never need it. For this coverage to go into effect, the act of terrorism must be certified by the Secretary of the Treasury of the United States. Ask yourself before you cancel your coverage, what are the chances that your location will be the victim of such an attack that it requires the US Secretary of the Treasury to declare it an act of terrorism?

 

Lead On!

Steve

Filed Under: accounting, budget Tagged: ,

Memorial Letters

Posted on June 2, 2015 Written by

Memorial notes are acknowledgement letters sent by the church to both the donor and to the family of the deceased for whom the memorial gift was given. It is important for the finance office of a church to get these memorial acknowledgements mailed as soon as possible (within a week of receiving the gift). Some members of a church expect to receive a letter from the church and will call the church if they haven’t received anything; for good relations with donors, let them know ASAP about their gift.

 

Memorial gifts are also an additional revenue stream if churches will develop this. People want to give money to whatever cause the deceased person was closely attached to. Churches will be wise to work with families during the funeral preparation time to steer them toward selecting a ministry of the church which can use the additional gifts.

 

This may seem callous but it isn’t. Someone is going to get that money. Why not the church since it will be the church that does the funeral and takes care of the family? Why not encourage gifts to the church cause was most dear to the deceased? All church ministers, especially those tasked with pastoral care, need to be taught how to bring up the subject of directed memorial gifts.

 

Then, when the gifts come in, send out nice and appropriate thank you notes to the donors and gift receipt acknowledgements to the family members.

 

Lead On!

Steve

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