Your #1 Strategy For Financial Health in 2021
By Kristen Alexander
As church and ministry leaders, you likely faced unique hurdles in 2020 that you haven't met before. Organizations running on the faithful contributions of donors may have encountered setbacks during the pandemic. Your financial management may have unexpectedly changed as you adjusted to the "new normals" presented to us.
Every day, our team has conversations with pastors and ministry leaders about how to wisely steward their resources during times of crisis. As a result, we've learned what some organizations are doing to press through hardships and come out stronger than before.
Let's discuss how you can financially strategize to better serve your own organization in the New Year.
Create a budget
There may have been a time in the past when you had to make difficult financial decisions. As many of you may have experienced last year, a crisis can lead to fewer funds coming into your ministry.
Overall in 2020, you should have seen a decrease in your expenses, such as utility, event, or travel costs change for your church or ministry. So how do you financially adjust to these new changes?
The answer lies in planning your budget!
Many leaders get stuck before they even take the first step. The fear of starting something new, especially something you don't know a lot about, can be crippling. This can be the case whether your ministry has been around for 200 years or you're planning to launch in 2022.
1. Know your vision.
Your budget needs to be aligned with your vision to make sure the resources you are spending today are taking you toward your vision for tomorrow.
2. Create Categories
Breaking down your income and expenses into a few broad categories lets you know which of those categories need more attention. That way, you can maximize your time spent working on budgeting.
For expenses, each ministry can have a different variety of costs, but we've found that most expenses fall into one of five categories:
- Personnel
- Facilities
- Administrative costs
- Ministries
- Outreach
3. Determine your income from the previous year.
It's essential to gather your church's past income history, like your income statements for the last three years. If you don't have an income statement, go to your bank account deposits, which will include tithe, missions, building fund, special projects, and any other areas to which you allocate funds.
Some common sources of income for churches include:
- Offerings
- Tithes
- Charitable donations
- Building fund
- Vision funds
4. Determine your expenses for the next year.
When you plan your budget, the best place to start is to focus on the areas that are the most likely to remain fixed and stable. This may include your lease or mortgage, insurance, your core staff's salaries, and the costs of running your core ministries. Such expenses tend to be very predictable for most ministries and churches.
Your maintenance and benevolence accounts are two areas that most ministries have a hard time gauging during the year due to unforeseen circumstances. Having to spend money on unanticipated repairs or events can throw your budget into disarray if not pre-planned accordingly.
We recommend building in an extra amount in these areas, especially if your church is located in an older building more prone to maintenance needs.
We know that handling the finances for your church or ministry can be overwhelming and confusing. We created our StartCHURCH Bookkeeping Service to help you get back to doing what you love! To learn more, please give us a call at 877-494-4655 or click the link below!
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5. Remember the 90% Rule.
One of the most frustrating facts about budgeting is that you're never going to be 100% right.
Office supplies, travel, advertising, marketing materials, gifts, or other miscellaneous expenses are examples of charges that can change regularly. If your budget is aligned to your vision, and you know what is NOT changing, then responding to what IS changing is much easier.
One of the tools that many ministries use is the 90 percent rule, which is a way of underestimating your income to build-in a buffer for change.
To follow this principle, assume your donations will only be 90 percent of what you brought in the previous month or year. If your ministry is growing, this gives you peace of mind to make decisions even in the midst of unexpected changes.
6. Create an emergency fund.
By including an emergency fund in your budget, you can prepare for unexpected expenses you may face. Putting away one to three months' worth of expenses into an emergency fund can get you through what would otherwise be a difficult season without being overwhelmed by stress.
You will also want to be aware of whatever is currently available to your organization, like government aid and tentative due dates and extensions for possible organizational filing.
7. Don't be afraid to make the hard decisions!
One of the biggest strategies to implement during a time like this is not being afraid to make hard decisions.
Financially, it could mean not starting a church campaign that you were planning on doing, letting some staff go, or rearranging finances to reflect your new priorities.
We Serve an Amazing God
While we don't know what tomorrow holds, we do know that we serve an incredible God who has promised to walk with you no matter what may come.
Know that our team at StartCHURCH is praying for each of you and your churches and ministries as you enter a New Year.
If you would like more information about how StartCHURCH can help you protect your organization, please give us a call. We would be honored to serve you in any way.
Remember: budgets change, plans change, but God remains the same!
If you would like to learn more about managing your finances in the new year, please call us at 877-494-4655 or click the link below to schedule a call to speak to a specialist!
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