When I was a kid, my mom always put vegetables on my plate, and I couldn’t leave the table until I ate them. When peas (which I hated) were on the menu, I’d eat everything else first. Then, when I was tired of waiting to go outside and play, I’d plug my nose, take some big bites, and choke them down.
One good thing about being an adult is that no one forces you to eat your peas. You may know that eating your vegetables is a healthy choice, but you don’t always make that choice.
It can be the same with ministry finances. We know that setting aside money is a healthy financial choice, but we don’t always do it. At ECCU, we work with thousands of ministries all across the U.S. Some haven’t set aside adequate money. The consequences of this choice can be significant, especially when things don’t go quite as we had planned.
The Great Recession may be over, but many consumers live with financial uncertainty. And when consumers are uncertain, the ministries that rely on their donations can feel the impact.
Many ministries are now budgeting for 2014, making decisions about which programs to fund next year. Meanwhile, year-end is approaching, the season when ministries typically see the largest influx of donations. If your donations don’t match expectations, you may need to make some quick adjustments, unless you have set aside adequate reserves.
Faith is central to any ministry’s financial stewardship. So is maintaining adequate reserves (liquidity). You need reserves three key reasons:
Cash flow: Donations seldom come in exactly when they’re needed. Consequently, we often spend money on programs before we receive all the funds. So we need to have some funds set aside to cover this delay.
Unplanned expenses or events: These seem to hit at the most inconvenient times, and they can put us in a panic if we don’t have extra funds to pay for them. If a natural disaster strikes (yes, I’ve heard those really do happen), you’re likely to have unplanned expenses. Losing a key donor would be an unplanned event. Reserves would help close the gap.
Potential ministry opportunities: These occur when God places a need or opportunity in your ministry’s lap, such as the ideal candidate for a position you were budgeting to hire in six months. Without reserves, you may have to pass on the opportunity.
For these reasons, you should calculate how much in reserves is adequate for your ministry and work toward setting aside that amount.