Decision-making Questions

Posted on August 20, 2013 Written by

Gray areas are dangerous territory. When something is not clear cut and no easy decision can be made, it is a gray area. To help navigate those gray areas, ask yourself several questions:

  • What is the upside versus the downside of doing or not doing this action?
  • What is the wise thing to do?
  • What would a prudent person do?

These questions will make you pause long enough to help you make the right decision. Sometimes you only need to ask one of these but sometimes you should ask all three . You can figure out when to ask which ones.

What is the upside versus the downside of doing or not doing this action?

By definition, decisions mean choosing one thing over another. That means you give up something in favor of something else, and you want to choose correctly. This question asks if the benefits of this decision outweigh any negative consequences. Sometimes a decision made with good intentions can have unintended divisive results and you need to determine ahead of time if that good decision is worth it.  Make sure the downside never overshadows the upside; if there is a chance it will, don’t do it.

What is the wise thing to do?

Andy Stanley wrote a book The Best Question Ever in which he posed this question as THE basis for all life-decisions. I agree – asking yourself “is this the wise thing to do” will always make you stop and ponder the consequences of your upcoming actions. Wisdom is a life skill that increases with age and experience. Even if you are a teenager, asking this question can simply slow you down before committing to something so that you can make that decision in a well-thought-out manner.

What would a prudent person do?

Ask this question especially when there is a legal issue at heart. Let me be more explicit: can you stand in front of a judge and with a clear conscience justify your decision, such as why you spent that money on some product or didn’t spend money on some safety feature? Make sure you have the right reasons for your decision and then proceed.

Leadership is all about decision making. That is pretty much what leaders do all day long: make decisions. Here is my final rule:

Make the right and wise decision based on all the knowledge and information you have at that time. Go full-speed ahead with that decision. As you go along you will gather more information, and if any of that additional knowledge is sufficient to warrant a new decision, then do it. Never stick with a wrong decision in the light of data which can help you make a better decision. Then, make the new decision and proceed full-speed ahead until/unless you get info that will change that decision.

Lead On!

Steve

Filed Under: church administration, leadership, strategy Tagged: , ,

Standing Rubble (part 1)

Posted on August 6, 2013 Written by

David, King of Israel from (1,000 to 960 BC) really, really wanted to build the temple but God said that David had too much blood on his hands from his battles with the Philistines. Instead, the job was given to his son, Solomon, who built an incredibly beautiful temple which lasted several hundred years until it was destroyed in 587 BC when Nebuchadnezzar’s armies invaded.

A few dozen years before the birth of Jesus, Herod’s Temple was finished until it was destroyed by the Romans in 70 AD after a Jewish uprising (same revolt as Masada). Herod’s Temple was the very one that Jesus lived in for 3 days as a young boy, the one that he visited numerous times, and the one that is commented on in Matthew 24:1-2:

As Jesus was leaving the Temple grounds, his disciples pointed out to him the various Temple buildings. But he responded, “Do you see all these buildings? I tell you the truth, they will be completely demolished. Not one stone will be left on top of another!”

The Jerusalem Church was led by James, the brother of Jesus. This was the very first center of Christian community and is sometimes described as the “mother of all Christian churches.” When the Romans invaded Jerusalem, Christians (and Jews) scattered throughout the world, taking their faith with them and spreading the Gospel. No one knows where that church in Jerusalem was located, and no trace of it is found today.

These are arguably the three most important structures in the history of ancient Judaism and early Christianity. There are many, many more recently constructed buildings of note (St. Peter’s in Rome, St. Paul’s in London, Haggia Sofia in Istanbul – originally a church, and countless temples) but none of these have the pedigree of Solomon’s Temple, Herod’s Temple, and the First Church of Jerusalem.

So, why am I writing about these? That’s my next post.

Lead On!

Steve

Filed Under: buildings, church administration, church finances, facilities Tagged: , , ,

Church Fellowship Budget

Posted on July 9, 2013 Written by

Decades ago many churches decided that they would be intentional about church fellowship, so they created the Wednesday night supper followed by the mid-week Bible study and children’s programs. This system worked well till about the mid-1990s. For the past several years, this form of fellowship has encountered many problems, and increasingly churches are finding it hard to continue this programming. Some churches are overly wedded to the Wednesday night supper and view that time as the most important fellowship activity in the life of a church.

 

Fellowship is critically important to a church. I wholeheartedly believe in and appreciate fellowship times. Many, if not most, church fellowships involve people coming to the church for a food function. I’ve been blessed countless times with Pot-Luck Suppers, Dinners on the Grounds, etc. But I want to challenge the church of the 21st century to think outside the box regarding fellowship. In fact, I want to challenge the church to think outside its four walls and into its community.

 

The purpose of fellowship is for church folks to get to know each other in venues and activities outside of Sunday worship and Sunday School. This is an opportunity for people to talk about football, children, work, etc. in a “non-churchy” setting. This is a time for people to get more closely acquainted, to hear one another’s heart concerns, to laugh uproariously at stories and jokes, to make memories which will be recalled in years to come, and just to enjoy being with each other.

 

I realize that Wednesday suppers are a good attempt at accomplishing this goal, but frankly they don’t reach their intended goal. Here is an alternative: planning family-oriented events which are held outside the church grounds at least on a quarterly basis.

 

Three to six times a year, the fellowship committee of the church can use its budget to find, promote, and schedule events which put the church members into their community. For instance, the church will attend a baseball game together, have a bowling night, have a picnic in a local park with inflatables, or plan a weekend retreat at a beach or mountain locale, etc.

 

The idea is to involve the church in its own community and to be identified as a church. Too often the community sees the church as the people who attend and stay inside the building at a specific address. We all know that the church is not a building; it is the people, and they must be integrated into their community. Jesus himself spent a lot more time wandering around villages and cities than he did inside a synagogue. Jesus knew the value of being out and about instead of in and within.

 

How will this affect the Wednesday fellowship and activities? That is for each church to decide. I think many will decide that those funds could be better used to fund these events outside the walls of the church. If a church will conduct a study on how best to use their limited financial resources, they may determine that there is greater impact on their neighbors by having fewer but more significant events outside the church’s buildings. Will this affect current age-level programming on Wednesday evenings? Yes, and this is an opportunity for the church to be creative: to decide if it should change its age-level programming, to think about new dates and times to implement new opportunities, to “think outside the box” in ways that will help the church reach its community with the Good News of Jesus. Doing the same thing again and again isn’t reaching our world very well; in fact, it’s often not even reaching our own members very well.

 

Think creatively – after all, we are made in the image of the Creator, our incredibly imaginative God!

 

Lead On!

Steve

Filed Under: budget, church administration Tagged: ,

Church Debt #2

Posted on July 2, 2013 Written by

My previous post was a primer on church debt. In this post, I want to focus on the interest rates that churches pay. There is a simple way for churches to pay less in interest and use that money for staffing, buildings, programming, or additional payments on the principal.

First, indicators that you should refinance:

  • If a church has an interest rate that is more than 1% over the current market rate, then refinance
  • If the church’s current terms are less than 12 months from renewal, then refinance
  • If the church needs additional capital for a project AND the church’s debt-to-budget ratio is less than 200%, then refinance and include the additional amount in the new mortgage

One of the biggest questions facing church finance committees on the subject of refinancing is whether to get a fixed or floating rate interest note.

  • A fixed-interest-rate note is just that: for the life of the loan, you’ll always pay the same interest rate. It is easy to budget for this and there is a measure of certainty and even security in knowing exactly what the monthly mortgage bill will be. This is a good tool for small amounts.
  • A floating-interest-rate note is pegged to one of two interest rates: US Prime Rate (set by the US Federal Reserve and major US banks) and LIBOR (an acronym for the London Inter-Bank Offered Rate and is set in London as a basis for international loans). Floating rates can be either higher or lower than fixed rates – it is all dependent on the financial world. note that many banks will allow floating rates to be changed to a fixed rate at some time during the five year period.

No one knows what the interest rates will do over the next five years, yet that is exactly what finance committees are trying to guess. Do they lock in a fixed rate for five years to have a stable figure for the budget, or do they try to pay less with a floating rate knowing that if they’re wrong, the floating rate could go sky high before they can lock it in? Here’s my suggestion as to which interest rate tool a church should use: BOTH.

Instead of trying to guess either/or, do both/and. The church should take its current loan and get the bank to finance half in a fixed-rate note and half in a floating-rate note. Each month the church will make its regular principal and interest payments from its budget and capital campaign receipts. Then, as the church receives additional gifts toward the debt, the church will make additional principal payments against whichever note has the highest interest rate (fixed or floating). This is important – you want to first knock down the debt of whatever note has the highest interest rate. This may change during the course of the debt: the floating rate may go higher than the fixed or vice versa, but you always want to pay down whichever note has the highest rate, not the one with the highest debt.

This is a simple concept which may take your bank a while to accept, because it is not to their advantage. But this is God’s money – use it to the church’s advantage!

Interest Rate Hedges or Insurance: The financial world has come up with many tools to decrease the perceived risk in interest rates. My experience is that these are usually balanced in favor of the bank and they are not worth the extra cost to the church.

 

Lead On!

Steve

Filed Under: budget, church administration, church finances Tagged: , ,

Church Debt #1

Posted on June 25, 2013 Written by

Many churches have sizable amounts of debt. Too often this debt hampers the church from paying its staff properly, maintaining its buildings adequately, or funding its programming sufficiently. Let me be clear: I despise church debt and encourage every church to do everything it can to get out of debt ASAP. Church debt is nothing more than giving money to a bank when the money should go elsewhere.

 

That said, I understand the reason for debt: to get some money up front to enable the church to construct facilities which will draw in people who can then provide additional receipts to pay for the staffing, buildings, programming, and debt.

 

I also understand that banks like to loan money, and they’ll tell a church that the debt limit is three times their annual income (much like a homeowner’s mortgage). I disagree: anything beyond two times will hamstring the church financially for years to come (much like a homeowner’s mortgage!). If your church’s debt is over 200% of your annual budget, you need to have a capital campaign to eliminate your debt as soon as possible or at least reduce it to a manageable level. Please pay attention to your debt.

 

All debt has three components:

  1. Time: Church debt is commercial debt in that it almost always has a five-year repayment time period. It is not like a homeowners’ mortgage which lasts 30 years but instead, church notes are a five-year note with a “balloon” at the end. The balloon means that the bank knows you won’t pay it all off during the note’s time limit of 5 years, so that means you’ll pay it all off in a balloon payment at the end of the time period OR you’ll refinance the debt (the latter is almost always the case). However, the bank bases its fee schedule on a 30-year note to keep the monthly mortgage payment low enough for the church to pay.
  2. Amount: This varies from church to church based on the need. I’ve seen churches do foolish things such as giving in to the desire to obtain a short-lived item and then putting that cost into the mortgage. For instance, some churches want a van so badly they’ll take that expense and add it to the mortgage, which means they’ll pay for that van for 30 years—about 20 years longer than the van will last. Please make sure you only finance things that will last at least the life of the mortgage.
  3. Rate: See my next post on this subject.

 

Church bonds: I’ve never been part of a church that floated bonds. However, I’ve seen churches use a bond issuance very successfully. This is a creative way to finance a church’s capital needs. Most of the bondholders will be the church members who will give money to the church to pay off the bonds. Occasionally someone from outside the church will buy a church bond.

 

It does take some money up front to work with the bankers and lawyers to get all the legal work done so ensure that you have some capital before you start down this path. Some churches encourage bondholders to gift their bonds back to the church during the course of the note. For instance, sometime people give a bond to the church at Christmas: they’ve “forgiven” the debt, so the church no longer owes principal and interest on that specific bond. Throughout the life of the bond, the church will pay out interest to the bondholders – the interest is paid from funds raised and gifted by members. Also, bonds are bought back by the church as the church has funds available.

Lead On!

Steve

Filed Under: budget, church administration, church finances Tagged: , ,

Wedding, Funeral, and Other Services Income

Posted on June 18, 2013 Written by

Question: When a pastor performs a wedding, funeral, or other event and is paid, does he/she have to claim that money as taxable income?

Answer: Yes, wedding/funeral/speaking gifts to a pastor are considered taxable income. These gifts usually go straight to the pastor and are often not given by the family through the church. Keeping it off the church’s books is the cleanest and simplest.

More Info: A way to use that money for ministry is this: the pastor takes the money from a wedding/funeral, records it for his/her taxes, then gives it to the church into a designated fund (“Pastor’s Ministry Fund”) which only the pastor can access. Then, during the year as the pastor has meals, buys books, buys a gift for someone, etc., the pastor can pay for that expense out of the designated fund. That expense won’t affect the church’s budget (because it’s a designated fund), the pastor gets a tax break on the gift he/she received because the gift was donated to the church, and the pastor gets to use that money for something related to his/her work AND there is proper oversight because the money is run through the church (meaning, it is subject to a review by members of the Finance or Audit Committee – that oversight protects the pastor lest someone accuse him of spending money frivolously). It is a neat way for the pastor and church to get a win/win.

 

Lead On!

Steve

Filed Under: church administration, church finances, church staff Tagged: , ,

QR Codes

Posted on June 4, 2013 Written by

QR codes are free. Get a QR code for your webpage for online giving. Print the QR code in every week’s bulletin and remind people they can give online by scanning the QR code in the bulletin. Keep the CR code in the same place in the bulletin so people will know where to look for it each week. For the increasing number of people who don’t carry cash, this is a simple way to facilitate electronic giving (after all, everyone carries a smartphone everywhere but wallets are disappearing).

Lead On!

Steve

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

Revenue Projections Spreadsheet

Posted on May 21, 2013 Written by

Projecting church gifts is difficult but not impossible. If you have a few years of giving history and a good spreadsheet, you can get a pretty accurate forecast of how much a church will receive in a current fiscal year with a high degree of statistical confidence, about 98%. I use this with the most important revenue stream for a church, gifts and offerings, but it can be used for any revenue stream that is relatively stable (no major fluctuations from year to year).

To do this, you’ll need at least four years’ worth of giving data with totals by month. The more history you’ve got, the more accurate your projection will be. If you keep up this spreadsheet, each year, the forecasts will get more accurate. Here’s how to do the financial forecast:

  1. Look on the Free Resources tab for the Annual Revenue Projections spreadsheet and open it.
  2. Fill in the church’s or organization’s name
  3. Change the “Year’s Row” to reflect the years for which you have data
  4. Enter all the data for all the years prior to the current fiscal year
  5. Enter current year data through the most recent month in the current year’s column
  6. Change the formula in the row “Through the rest of year”
    1. If you have current year data for seven months, then change the formula in B20 to add up the giving for the last five months of the year.
    2. Repeat for all prior years – you want to add up in row 20 the amount given in each respective prior years’ last five months
    3. The current year’s row 20 cell cannot follow the pattern of the previous cells because there isn’t any data to add. Instead, average the percentage data for all the previous years.
    4. This step, #6, is crucial – it is the only step that is changed each month. As you input data for the most recently completed fiscal month in the current year you’ll need to change what months are added in row 20.
    5. The spreadsheet will give you a figure in “Projected Total as of EOM” (end of month). That is the forecasted receipts figure based on the data you have so far. I suggest copying that figure into the row underneath for the appropriate month so you can see from month-to-month how the forecast changes.

I’ve used this spreadsheet for about 10 years and it uncanny how accurate it is when you’ve got six years of prior giving history and six months of current year giving data. In fact, give the spreadsheet a test: since you know what the total giving was for your most recently completed fiscal year, enter the data as if that year were still in progress and see what the model forecasts with six months’ of data or seven. Compare the forecast with the actual year-end figure to see if it was within a statistical margin (4% or less).

The model isn’t flawless but it is about 98% to 99% accurate. Your Finance Committee will be impressed! This spreadsheet does not account for variances that skew giving such as major gifts or deaths or departures of major givers so consider those events when entering your data. Make sure you save this spreadsheet to your files so you can update it each month.

 

Lead On!

Steve

Filed Under: church administration, church finances, strategy Tagged: , ,
« Previous Page
Next Page »