Budget Categories

Posted on January 26, 2016 Written by

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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

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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: , , ,

Beetles

Posted on January 12, 2016 Written by

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There are 350,000 types of beetles. New beetles are discovered frequently in the tropics which are still being explored. Some estimate that beetles constitute over 20% of all current life-forms in the animal kingdom. Lady bugs, cockroaches, dung beetles, rhinoceros beetles, etc – there are LOTS of beetles.

Why? Why did nature create so many beetles? Why did God allow so many different types of one animal? I don’t know. It really doesn’t matter to me and probably not to you.

What I do know and what does matter to me is that beetles show how creative God is. I would have been happy to know that we had just 20, 30, or even 100 types of beetles. But God is completely about creativity. Just look around – there have been 8 or 9 billion people on earth and everyone has 10 different fingerprints, retina patterns, face, etc.

God is all about creativity. And we should be creative, too, especially in church. But too often we resort to comfortable patterns and routines. These ruts embed grooves in our brain and in our way of thinking.

Please do not succumb to “because that’s how we’ve always done it” mentality. God doesn’t – why should we? Be creative in all you do. Be creative in worship, education (especially with young minds), in music, in office administration, and even in finances (without doing anything illegal!).

There are so many opportunities to “think outside the box” but too often we restrict ourselves or others. Don’t do that. Be more like God – BE CREATIVE and IMAGINATIVE!

 

Lead On!

Steve

Filed Under: leadership, strategy Tagged: ,

More Fish Pictures

Posted on January 5, 2016 Written by

2014 12-December 23 (585) Vatican; Sistine Chapel

A few decades ago I was visiting my best friend, Charlie, at his work when I heard a story about James Knight, the owner of Knight-Ridder Newspapers, and its flagship, the Miami Herald. Charlie worked for one of their papers, The Keynoter, a weekly tabloid-style paper aimed at residents and tourists in the Florida Keys. Every page has three things: a news story, advertisements, and a picture of a tourist with a trophy fish catch.

The manager of floor told me that one day, there was something unusual about The Keynoter and James Knight saw it. As Mr. Knight was proofing the paper after it came off the press, something caught his eye. Actually, it was the absence of something. He picked up the phone, called the editor, and told him the paper needed “more damn fish pictures.”

Mr. Knight knew that a large portion of the sales of the newspaper was by tourists who bought dozens of copies to take home to show their friends their trophy-sized fish. If there weren’t fish pictures then sales would drop off. Mr. Knight knew his business and he knew the power of images.

I’m not suggesting that churches publish more fish pictures, but I am saying that churches should use images and pictures more and words less. The current best example I can think of to prove the value and power of images is Facebook. We are naturally drawn to read stories and captions where there are pictures. When friends post only words, we skim what is written, but our eyes are drawn to the next post with a picture.

Use images as often as possible. Jesus used word pictures because there weren’t any images for the common person in Gospel days and people could see in their mind’s eye what Jesus was telling. Be imaginative in your use of picture and images. And use lots of them!

 

Lead On!

Steve

Filed Under: communications, leadership Tagged: ,

Changing Plans

Posted on December 22, 2015 Written by

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Question: Several years ago (2009 or 10), Grace Church entered into a building program for a Family Life Center. They set up a designated fund for the project, and after voting on a design and posting it around the church, they started collecting money. There was an early attempt to set the fund as a general building fund, but it was set as the Family Life Center Fund. Some contributions were significant (at least $10,000 dollar gift). The goal was over $850,000 but the plan was to raise $450,000 within a few years and finance the rest.

Currently there is $211,000 in the fund and many people want to either change the plan to a smaller, cheaper building that does not meet the original use ideas and does not match the floor plan voted on or cancel the project altogether. Undesignated receipts haven’t been over $150,000 in the past 20 years. The problem is that most of the money was accepted, but no records were kept as to who donated what.

At a recent called meeting to discuss this, the questions were about what they could do legally about the situation. Can we change the building? Is there any way to cover ourselves if we cancel or change the program but cannot identify most of the contributors? I know what I have always been told, but some of my members insist that the money was given, so they can decide how to use it.

Answer: This is a tough situation with a hard answer but this is the proper way to handle this. Here are the proper steps to follow:

  1. Contact every donor that you know about and ask them to sign a document giving the church permission to use the funds for another purpose or even unrestricted uses (aka, to the ministry budget). After that, move out of this fund all monies you’re given permission to move to whatever purpose the donor permits.
  2. Get the church to formally vote on how the church would like to use the remaining funds. Use paper ballots and retain the ballots in case there is a need to show them later. I strongly encourage you to find a purpose that is as close as possible to the original purpose and get the church to vote on giving the money to that. The reason for doing this is to prove to others what the owners (church members) want to do with the money. Again, the church should appear unanimous in what it wants to do with the money but this vote does NOT permit the church to move the money as it wants. It is merely an indication of what the church wants to do.
  3. Contact the state Attorney General’s office at (804) 786-2071 and use the courts to seek release.Explain to the AG’s office what the story is and what the church wants to do with the money. The AG should take this request to a judge and get a judge to sign off on it. This may be done in the judge’s offices or the judge may want to have a public hearing on this – I don’t know and I suspect that each judge will handle it differently. Hopefully it is a perfunctory process but that is probably only possible if no one in the church squabbles about where to use the money. Always follow the instructions of the AG – that way you’re doing exactly the right thing.

Lead On!

Steve

Filed Under: accounting, church finances, leadership, strategy 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

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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

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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: , , ,
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