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4 Ways To Avoid A Fiasco In Your Church Cash Flow Analysis

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In the last 8 years, I have conducted over 130 church health consults across 5 nations.

During a consult, I analyse 12 separate, yet connected, pathways in the life of the church. One of those is the financial pathway.

Due to my lack of financial training, it’s not an in-depth audit.

I don’t provide training in understanding balance sheets or P and L statements, nor do I provide reporting mechanisms such as monthly expenditure reports or a church cash flow template.

Those are beyond my expertise so I provide a leader’s view of trends and major focal points. One of the key areas I explore is the church’s cash flow.

Cash flow impacts pastors

I know that the church cash flow will have a significant and measurable effect upon a pastor’s emotional well-being and upon their leadership life. It can also cause a pastor to avoid preaching on money or worse still berating their church over their stinginess.

church cash flow analysis

While I want pastors to shepherd their flocks with faith and courage I don’t want them being careless with money and suffering the consequences of poor financial management.

Therefore, I’ve asked my good friend Greg Smith, who works at Empart, to write at length about the level of church cash flow analysis you need in your church.

Cash is king

You’ve heard the term ‘cash is king’ and no doubt been encouraged to not personally over-extend use of your credit cards and to live within your means. Why then do so many church leaders have difficulty in applying these principles in the day to day operating of the church’s they lead?

The financial management of a church is a spiritual and stewardship issue that is one aspect of leading a healthy church.

It’s one of the indicators that senior leaders need to church monitor. However, it is an area that can be a daunting and neglected issue by pastors when it may not be their primary gifting or amongst their skill set.

Your church has cash flow problems when you see these symptoms

  • Not being able to pay bills at all or on time
  • Failure to pay staff appropriately or on time
  • You start using designated gifts for purposes that they weren’t intended for (e.g. Start using missions or building fund gifts for general operating expenses)
  • Your level of debt is increasing but with no measured plan to repay the debt or review it at a set point

While these sorts of symptoms aren’t positive, the pressure of consistently playing catch up and operating a church like this can be a major factor in the complete demise of a church.

Financial pressure like this can

1. cause compromises to the financial integrity of the church’s operations

2. negatively impact on your ability to lead and cast vision for the church

3. foster an environment where you cannot retain key leaders or staff

4. create a poor reputation in the wider community and local businesses

5. ultimately degrade the church’s ability to carry out the vision and mission of the local church.

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Managing the church cash flow is complex

Managing cash flow in a church and non-profit environment can present a range of complexities not normally found when operating a standard commercial business.

It’s a challenge and constant tension to have an appropriate mix of faith in God for His provision and at the same time diligently steward what He has resourced you with right at that moment.

It’s a challenge to manage the seasonal fluctuations in giving levels that can occur during a year, even week to week.

Throw in the variations in cash flow that can happen when additional appeals for a building program, missions or a special need come up and you can see that church finances can be more volatile than the ups and downs of the stock market.

Despite these challenges, there are a number of things you can do to not just survive the week to week challenges of running a church but to proactively position your church to be sustainable into the future.

Four ways to avoid a fiasco in your church cash flow analysis

1. Forecasting is not just for meteorologists

Establish a budget and map out a church cash flow projection of your income and expenses over the next 12 month period.

Track giving levels over the last three years to evaluate the level of giving and any expected changes

2. Understand that the church cash flow will be a roller coaster

Your cash flow will often resemble a roller coaster with dips and peaks, highs and lows.

Aside from seasonal patterns (i.e., lower income in the winter), other factors may cause exceptions to the normal flow of giving and expenses. Examples: A building program may produce a surge in offerings, or a large Christmas event may incur significant expenses.

What to look for:

  • High and low-income months.
  • Seasonal periods of greater spending.
  • Points where income is low and spending is high, and vice versa.
  • Overall trends: Is giving up each year? Plateaued? Falling? How much? Is one year quite different from the others? Why?

3. Watch it like a hawk

You need to have a keen awareness of how and when funds come in and go out, paying careful attention to the times where the cash flow in either direction is disproportionate.

In addition to the normal monthly monitoring of your church’s cash flow statement, you should set a predetermined indicators.

These will trigger you to start making adjustments to your budget or some planned spending if you are behind in anticipated income levels.

4. Flex your muscles and your budget

When forming your budget for the year ahead have some planned flexibility factored into your budget.

A single budget doesn’t normally cater for all the setbacks that may occur, so it’s useful to have some alternative spending plans.

These can give you the ability to delay some spending,  set aside some income for high expense months or charge for some events or services that you might normally offer for free.

Obviously, this is just one aspect of growing a healthy church and there is much more on this topic that can be explored.

Remember to gather those in your church with the gifting and skills that can work alongside you to manage this aspect of church life well.

While the consequences of not managing the church’s cash flow can have many far-reaching impacts, when we do manage the resources He has entrusted us with we honour God, practice being faithful in Him for the provisions we need and experience His peace in the challenges we face.

Thanks Greg and I hope this helps you avoid any fiascoes in your church cash flow analysis. 

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