In my church health consults, I look at the financial pathway alongside the other parts of church life. It is a broad review of trends and priorities, rather than an accounting audit.

I don’t provide detailed training in balance sheets or profit and loss statements. But I do pay attention to cash flow, because financial pressure affects a pastor’s leadership and the church’s ability to carry out its mission.

Church cash flow analysis looks at the timing of money coming in and going out. A forecast helps your team see pressure points ahead and plan its response.

Key Takeaways

• Forecast when income will arrive and expenses must be paid.
• Use your church’s giving history to identify seasonal patterns.
• Watch for late payments, growing debt and pressure on designated gifts.
• Agree in advance when to review or adjust planned spending.
• Involve people with financial skills and keep the plan under regular review.

Cash flow impacts pastors

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

We all want a church to operate with healthy financial practices.

Cash flow is important if you want to grow a healthy church.

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

Also, I want them to develop a culture of generosity while increasing their financial intelligence.

My good friend Greg Smith contributed the practical teaching that follows, looking at the level of cash flow analysis your church needs.

Greg Smith’s guest teaching: Cash is king

You’ve heard the term ‘cash is king’ and no doubt have been encouraged to not personally over-extend the use of your credit cards and to live within your means. Why then do so many church leaders have difficulty applying these principles in the day-to-day operating of the churches 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 monitor. However, it is an area that can be a daunting and neglected issue by pastors when it may not be their primary gift or among 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 your ability to lead and cast vision for the church

3. Create 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.

Managing the church’s 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.

Managing the seasonal fluctuations in giving levels that can occur during a year, even week to week is challenging.

Throw in the variations in cash flow that can happen when additional appeals, such as an annual giving campaign for a building program, missions, or a special need come up and you can see that church finances can fluctuate significantly.

Despite these challenges, there are several 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.

Here are four ways to avoid a fiasco in your church cash flow analysis.

1. Forecast the next 12 months

Establish a church 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. Identify seasonal highs and lows

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

Alongside your church’s own seasonal giving patterns, 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. Monitor the forecast and agree on triggers

You need to have a keen awareness of how and when funds come in and go out, paying careful attention to the times when 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 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. Plan flexibility into your spending

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

A single budget doesn’t normally cater to 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.

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 gifts 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 honor God, practice being faithful to Him for the provisions we need, and experience His peace in the challenges we face.

Thanks, Greg. I hope these four steps help your church plan ahead and respond to financial pressure early.

Questions about church cash flow

What is church cash flow analysis?

It is a review of when money comes into the church and when payments go out. I would use it alongside the budget so the leadership team can see when available cash may become tight.

How far ahead should we forecast?

Greg recommends mapping income and payments over the next 12 months and reviewing the church’s recent giving history. Update the forecast as actual figures arrive and plans change.

How often should we review cash flow?

Regular monthly monitoring is a starting point in Greg’s guidance. I would ask the finance team what additional checks are needed when the forecast shows a difficult period ahead.

What warning signs should we take seriously?

Greg highlights late bills or wages, rising debt without a repayment plan, and pressure to use designated gifts for other purposes. Bring those concerns to the leadership and finance team promptly.

Who should help the pastor with this?

Gather people with financial skills who can work alongside the pastor and church leaders. Clear reports and agreed review points help the team respond together.

Australian churches can also consult the ACNC’s guidance on cash and accrual accounting, which recommends considering a cash flow budget that includes future large or one-off payments.