10 Financial Ratios (part 5 of 10)

  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

 

10 Financial Ratios (part 4 of 10)

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

10 Financial Ratios (part 3 of 10)

 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

10 Financial Ratios (part 2 of 10)

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

10 Financial Ratios (part 1 of 10)

  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

Strangling Termites

An Alabama termite inspector told me that Alabama has three termite colonies per acre. And that a termite can travel up to a quarter mile to find moist wood – it’s only necessary source of food, water and wood. And termites are devastating – a colony can eat over 10 pounds of wood in a year. The cost of replacing that wood can be huge.

We no longer use the chemical DDT to kill termites; instead, one solution is a chemical which inhibits termites from molting. A termite will molt several times in its life as it grows, much like a crab. If a termite can’t molt, it will grow within the existing shell but then it will strangle itself because of the small shell.

I’ve seen churches like that. They have outgrown their current shell but they are unwilling to change/molt. They feel that what worked decades ago should continue to work. Or that the buildings don’t need any updating because they look just fine. Or members don’t realize that church staff today must do things very differently than in prior years. These churches are strangling themselves within their own structures. While the world around them changes, they don’t.

Just like termites adapt to meet their future needs (as part of their life cycle), churches must be willing to explore changes they may need to make and then intentionally decide how they’ll adapt. The saying “change or die” applies quite aptly to termites. It also applies to a lot of churches. Too many are willing to die. There is no need for that – churches don’t need to embrace all changes, but they must be strategic about what they will do to help them survive.

 

Lead On!

Steve

Life-Changing Benevolence

Traditional Benevolence: the church is a collection point for charitable items such as food, clothing, household items, and money to help with other items such as rent and medical expenses. Church members should be encouraged to be generous with their gifts and not just give their leftovers or items they want to discard. I encourage churches to have a regular collection time; this can be monthly, every Communion Sunday, every 5th Sunday, etc. – just pick and stick with something.

I feel there is a much better and more biblically based form of benevolence but it is much harder and far less common in churches. I encourage you to seriously consider this form and decide if your church is doing benevolence to make its members feel good or to have a serious impact on the lives of others. This direction is much harder and requires the church to being a lot more intentional about what it wants to accomplish.

Benevolence That Changes Lives: The church should not be a distribution point for benevolence. Instead, churches should partner with local non-profits who are doing this type of work with excellence (key word).

  • The church can approach these local orgs and offer supplies (food, clothing, etc.), money (for benevolence and even for operations), and volunteers (church members who want to help others). Every non-profit you approach will jump at the chance to get more of these resources.
  • An understanding can be reached between the church and the org regarding overt/covert evangelism (you’re not asking my opinion but I suggest that church volunteers ONLY raise that subject if they are asked why they are doing that – the door is then open for a positive reply without shoving Jesus down someone’s throat).
  • This method allows recipients to go to places in an area of town they are more comfortable with than having to walk into a church (which is intimidating to non-church folk). This makes church members get out of their comfort zone (their church) and into the area of town where they aren’t comfortable but where the hurting and needy are located – church members need to suck it up and get over their fears. After all, Jesus went out to the highways and byways and didn’t wait for people to come to him (though many did).
  • This method allows a church to partner with an org that is far more skilled at distributing resources and determining who are the scammers and who are the truly needy. The partner org most likely has a database where they keep track of who has been helped, for what purpose, and how often.
  • This allows the church admin assistants (the first point of contact for many recipients) to focus on their work instead of answering the phones. And frankly, some of the needy can be scary (though almost never dangerous) and that can affect the work product of the church’s admin(s).
  • If more and more churches would partner with local orgs, the chronic needy would know where to turn for regular help (instead of going from church to church) and those orgs might be able to offer additional services such as job training and placement (to address long-term needs, not weekly needs).

I will say up front that moving your benevolence offsite gives less “glory” to your church and your members might complain about that. However, this is not about meeting the church’s needs but about helping others. God gets the glory (period). It’s not about us – it’s about us being servants to help others.

 

Lead On!

Steve

How to Use a Cab – for the Ride of Your Life (part 3 of 3)

 

Be nice to the cab driver

Wherever you find yourself, always, always, always look for ways to help people. No one will ever condemn you for being nice (and if they do, it says more about them than about you).

Speak kind words – thank you, please, yes ma’am, and yes sir. People appreciate politeness and it often deflates someone’s anger before they wail on you.

Often how you treat people becomes the way you are treated by the person with whom you’re dealing.

Respect the cabbie, anyone else in the cab with you, and anyone else whose waiting alongside you. Respect people.

If you give the cab driver the wrong address, don’t blame the drive

Everyone makes mistakes in life; everyone makes LOTS of mistakes. Learn how to handle them:

  • Don’t blame others for what YOU did or didn’t do
  • Analyze what went wrong and what you need to do next time
  • Handle the error with grace and aplomb – people will observe you how you deal with pressure and messy situations, especially ones that you created

Enjoy the ride and watch the scenery but watch the meter and other details

Take in the big picture of life as you travel. It can be as grand and glorious as you want it to be (if you take a few chances along the way). But also learn to observe the details that can make the experience of life that much more full of color. A field of flowers is beautiful; but each flower is amazing in itself.

Change cabs if your current cab can’t take you all the way

Be willing to adapt to the current situation and you absolutely must be willing to change as life changes. Flow is the best answer to flux. So, FLOW.

You’ll need to fight upstream a few times when injustice requires it. Thump bullies on the nose – they deserve it and it will teach them a lesson, but only do it if the cause is noble.

Other times you’ll need to jump and you’ll get some bruises and even broken bones. Leaping from the safety of your current ride is really scary but sometimes necessary.

Be ready for your destination

Look ahead to see what’s coming. Always be prepared. Know when the end of the current ride is drawing near and gather your stuff you’ve accumulated on that ride so you can leave properly. You can glance back to see where you came from but don’t linger – you need to be already looking for your next ride.

Get out when you arrive and don’t be pushed out the door

Sometimes the cab is ready for you to leave when you aren’t. Be intuitive enough to know that this period is over and you need to leave. Leave graciously – it speaks to your character. You’ll probably never take that same cab again, but word of who you are will travel quickly and affect what taxi you catch next.

 

And remember, have fun on the ride of your life!

 

Lead On!

Steve