ECCU Blog

Tuesday I blogged Vonna Laue’s responses to three budget-related questions to give you a preview of the expertise that resides on the panel for the upcoming budgeting workshop ECCU is presenting at the Christian Leadership Alliance (CLA) National Conference. (How to Build a Better Budget).

Next up is Hugh Burns, vice president of operations for the Denver Rescue Mission.

MBG:     What top three priorities should guide the budgeting process?

Hugh:      First, make sure your budget is relevant to your organization. For the Denver Rescue Mission, this involves having a process that holds department heads accountable to their budgets month-by-month throughout the year. We require department heads to provide commentary on budget-to-actual variances over 10 percent every month. We have found that this makes the budget process truly a part of our organizational culture.

Second, make sure the budget has been filtered through a process of review and discussion. Each of our department heads goes through a process whereby they propose a budget and then attend a meeting with the controller and the vice president in charge of their area. The department heads’ budgets are projected on a screen. We go through them line by line and challenge them to justify the dollars they propose to raise and/or spend during the coming fiscal year. Adjustments and revisions are made on the spot.

Finally, make sure the budget balances on a consolidated level after all department budgets are rolled up. We make sure we our budget balances, including planned capital expenditures and with a 3 percent contingency fund. We believe that this is fundamental for us to have a sustainable business model.

MBG:     What are two or three major changes you’ve made to your budgeting process and what was the result?

Hugh:      We have utilized some helpful technology in our budget process. The most significant of these is SharePoint, which allows us to create an Intranet where budget templates can be saved and accessed. This assures that there is only one version of the truth at any point in time. We can also link all the spreadsheets together and consolidate them into a top-level budget with very little effort. As we make changes to department budgets, the consolidated budget is automatically adjusted.

MBG:     How can an attendee prepare to gain the most value from this workshop?

Hugh:      Come prepared to throw out the challenges and problem areas in your budget process during the Q&A time. Someone in the room is likely to have dealt with those issues before and will be able to offer a useful solution.                                                                                

Again, this budgeting workshop will be on Thursday, April 11, from 4:00 to 5:30 p.m.

To register for the CLA conference, visit www.claconference.org.

Last week I blogged Billy Burnett’s responses to three budget-related questions to give you a preview of the expertise that resides on the panel for the upcoming budgeting workshop ECCU is presenting at the Christian Leadership Alliance (CLA) National Conference. (How to Build a Better Budget).

Next up is Vonna Laue, audit partner with CapinCrouse LLP.

MBG:     What top three priorities should guide the budgeting process?

Vonna:    First, be realistic, if you budgeted a 6 percent increase in 2011 and contributions were down 5 percent, don’t expect that without significant changes you will have 6 percent growth in 2012. Second, be missional. Your budget should reflect the direction of the ministry by funding strategic initiatives. This requires that you honestly evaluate programs to identify those that may be good but not part of the mission. Finally, be vigilant. Monitor, monitor, monitor and be ready to respond.

MBG:     What are two or three major changes you’ve seen ministries make to their budgeting process and what was the result?

Vonna:    One is budgeting year round instead of it just being a one-time annual event. This results in a deeper analysis and more proactive response than getting to the end of the year and being disappointed. Another change that some ministries are considering is building three budgets. Start with your basic budget, then build two more. One reflects what you will cut if the projected revenue doesn’t come in. The other accounts for how you will expand if excess funds are received. Doing this removes some of the emotion from those decisions when you actually have to make them.

MBG:     How can an attendee prepare to gain the most value from this workshop?

Vonna:    Consider in advance the struggles that you face in your ministry’s budget process and come ready to participate, looking for suggestions to help.

Again, this budgeting workshop will be on Thursday, April 11, from 4:00 to 5:30 p.m.

To register for the CLA conference, visit www.claconference.org.

Have you ever attended a Christian Management Association (CMA) brown bag luncheon? If not, April is a good time to get in on one of these monthly events if you’re in the San Jose or Sacramento area. They provide an informal roundtable atmosphere to network with your ministry peers and engage in a guided discussion led by an industry expert.

Two luncheons are scheduled for April:

April 12 (Thursday) from 12:00 to 1:00 p.m.
Crossroads Bible Church
1670 Moorpark Avenue
San Jose, CA 95128

April 13 (Friday) from 12:00 to 1:00 p.m.
Epic Bible College
4330 Auburn Boulevard
Sacramento, CA 95841

These luncheons are open to all ministry executives. The San Jose luncheon is geared specifically for business administrators, chief financial officers, and IT/technology staff, while the Sacramento luncheon will be of special interest to business administrators. CMA members attend free; cost for non-members is $10 (pay at the door). Everyone brings their own lunch and no RSVP is required.

To learn more about these luncheons, email Pam Boersma at pam.boersma@cmanational.org or visit www.eccu.org/resources/events.

In a recent letter to his shareholders, Warren Buffet makes mention of wisdom he learned from his grandfather, Ernest.

Buffet, who was listed again as the third richest individual in the world by Forbes Magazine, shared a copy of a letter* written by his grandfather in 1939 to his uncle’s family, outlining his instruction and encouragement to maintain $1,000 in cash as a reserve for unexpected events. Buffet included the letter to highlight both his personal commitment and the importance of this principle for all organizations, especially those he’s considering as investments.

Buffet says about his grandfather, “Ernest never went to business school—he never in fact finished high school—but he understood the importance of liquidity as a condition for assured survival.” 

Think you’re off the hook as a nonprofit? Not so. The importance of cash reserves applies every bit as much to ministry organizations as it does to for-profit businesses.

During my 25 years of working with evangelical non-profits, I have seen far too many that essentially lived paycheck to paycheck. Except it sounds more spiritual when they tell me they are “trusting God” for his provision. While I completely agree that we must trust our sovereign God (and that he is able to do exceedingly more than what we can accomplish with our meager savings), it is also clear that we have a responsibility to be good stewards of his resources. The challenge is finding that balance between God’s sovereignty and our responsibility. It takes both. A reliance on one without the other can prevent us from fully accomplishing what God intends.

So how do we live out this balance in our ministries? Warren Buffet says, “Because of that commitment (to maintain cash reserves), we customarily keep at least $20 billion on hand so we can both withstand unprecedented insurance losses…and quickly seize acquisition or investment opportunities, even during times of financial turmoil.” 

I know, I can’t comprehend a number as big as $20 billion either, but his approach shows how important the principle of maintaining adequate reserves is for any organization.

I’m going to go out on a limb here and say that maintaining adequate cash reserves is even more important to a non-profit than a for-profit organization. For-profit businesses have a much easier job of quickly generating cash, either by slashing expenses or increasing sales. Businesses focus on increasing shareholder value and act quickly to accomplish this objective. Non-profits, on the other hand, are typically slower to react and less nimble when needing to cut expenses or increase revenues.

So how do you approach maintaining cash reserves for your ministry? What has worked for you? What have you learned by going through the last four years, which some have called “the great recession”?

If you’d like to learn more about how to build cash reserves, check out the ECCU white paper, Cash Reserves: How Much Is Enough? It outlines the three main reasons cash reserves are required and how to set an adequate cash reserves target for your ministry.

* Go to page 22 of this PDF to view the letter.