ECCU Blog

Here we go again…

The last few weeks have stirred old fears and created some new ones about the ongoing outlook for our economy. The S&P downgrade of U.S. government debt and the ensuing market reaction have heightened concern that we may be in for a double dip or that the growth of the economy could stall in the foreseeable future. It looks like we are in for a long, slow recovery, perhaps longer and slower than once hoped, with unemployment not expected to drop below 8% before 2013.

So what is the one thing your church can work on now to be better prepared for whatever the economy holds in the coming year?

Budgeting is always important, but the frequent monitoring and updating of that budget is now more important than ever. Now is the right time to start involving your financial team in budget discussions to ensure that your money is enabling your mission. Stewardship will be increasingly important—clear, frequent, communication on ministry finances and impact will be crucial to sustainability.

With this in mind, there’s a webinar being held September 20 that may help if you’re looking to build and use a better budget.

The unemployment rate fell to a two-year low of 8.8 percent in March and companies added workers at the fastest two-month pace since before the recession began according to the Associated Press.

Stats like this don’t mean much on their own. My goal today is to help put them in context and begin to help your ministry better understand the general economic conditions that ultimately have a very real impact on the finances of each and every church.

You already know that we’ve recently lived through the most significant economic downturn since the great depression. We won’t get into all the possible causes here, but what we will do is explore where we are today and some of the signs we are looking for to help determine where we go from here.

The goal of this economic update is to share some of the latest data on various economic indicators and my interpretation of that data. It’s actually more interesting and relevant than I just made it sound…

2011 started out with a national unemployment rate over 9%, University of Michigan Consumer Confidence Index stood at 74.5, housing starts, which topped out at an annualized rate of over 2,300,000 in 2006, have been bouncing around the 600,000 mark for several months, and sales of existing homes continue to be slower than hoped.

As of the end of March, unemployment was down to 8.8%, new-car sales were up, and there were some encouraging signs on business capital spending as well as banks showing a greater willingness to extend new credit. However, housing starts fell below 500,000 and consumer sentiment had an unexpected drop to 67.5 in March, suggesting consumers are worried, a concern that is likely fueled, at least in part, by the recent dramatic rise in gas prices. 

While some progress has been made on unemployment and retail sales, shaky consumer confidence and a real estate market that simply won’t pick up continue to weigh on the economy and its ability to grasp on to meaningful recovery. Along with the general lack of direction across indicators, the recent spike in energy prices has created additional concern and real pain for the individual consumer.

The new normal is conservation and change. The individuals and institutions that understand and embrace this will be best prepared for recovery when it does fully take hold.

So what do all these numbers, stats, and trends mean for you and your ministry? For more on that, check out my post today at ChurchThought.com for some implications and suggestions.

Sites and articles consulted for this report:

Value Line

Reuters/University of Michigan Surveys of Consumers

NYDailyNews.com

Bureau of Labor Statistics

What is the one area that we see derail more ministries than any other? I’m sure you’ve already guessed that it has little to do with macro economic conditions or the weather.

In good times and bad, the area that poses the greatest threat to ongoing success in ministry is a loss (or perceived loss) of integrity.

Here are three steps you can take to ensure that your ministry keeps—and strengthens—its financial integrity.

1. Create an involved finance committee. When I meet with churches, the norm is a conversation with the senior pastor and a bookkeeper—the best have a competent and involved team of people who work together to ensure checks and balances.
2. Hire an outside CPA. If your ministry has more than $500,000 in annual income, we recommend that you minimally have a CPA compilation every year, and I’d suggest a CPA review as well.
3. Communicate with your congregation or donors. Stay in regular contact with updates about the financial condition of the ministry. This not only ensures that they understand and can hold leadership accountable, but also makes it easier to ask for additional giving when it’s needed.

Of course, it helps to find a financial institution that is aligned with your values and works to preserve your financial integrity (Hey, I can’t resist…this is important!). Look for product offerings that reinforce your commitment to integrity (like ECCU’s Positive Pay, which ensures that every check your ministry writes is verified for the same amount when it hits your account), or services like our ministry banking assessments to keep your financial strategies on track.

Bottom line: Accountability is king. The more safety nets you have in place, the less likely you are to fall.

What does your ministry do to protect financial integrity? Please leave a comment and share your practices with our readers.

Cash reserves. If you’re like me, your eyes glaze over when these two words are used together. It’s certainly not the most exciting topic. But, what we have found through the current economic downturn is that cash reserves are more important than ever for ministries.

Why do ministries need cash reserves? Consider these actual situations:

• Over the winter, I must have gotten calls from 50 churches that were panicked by their outrageous heating bills—two to five times normal.
• Churches in places like Charlotte, North Carolina, and Atlanta, Georgia, that almost never see snow had to cancel all services some weekends, and therefore took in virtually no offerings.
• The earthquake in Haiti created massive need. Many churches wished they could help but didn’t have the extra cash to do it.
• July was the hottest month on record. Three churches I work with had to replace multiple HVAC units.

These are just a few recent examples of situations where adequate reserves could have allowed ministries to move forward instead of only wishing they could, or prevented them from having to pull funds from ministry to pay unexpected bills.

Building cash reserves is actually not as daunting as it may sound. Our ministry development officers can help evaluate how much you need and then help you implement a plan to get started raising those funds.

Also, by increasing reserves and communicating what you’re doing to your congregation or constituents, you will be increasing your financial integrity with your givers by demonstrating good stewardship. How do you build reserves?

I’ve sat in the executive pastor seat. I know how challenging (even seemingly impossible) it can be to get the rest of the staff, especially your lead pastor, to value the same priorities that you do when it comes to church revenues and expenses.

That’s one of the reasons we developed the four financial priorities model at ECCU.

We talk with hundreds of ministries every year, from church plants with a few hundred people to some of the largest and most sophisticated ministries in the country. Some are growing rapidly, others are fighting to survive. What we’ve found as we look at the common denominators is that ultimately, all ministries really should have four financial priorities:

1. Ensure Financial Integrity. Without this one, the other three are useless, even dangerous.
2. Maintain Adequate Liquidity. Churches that had this in place over the past two years have continued to thrive while those that didn’t are often struggling or even out of existence.
3. Maximize Cash Flow. All about maximizing giving while also controlling expenses.
4. Leverage Assets. Ensuring you are being the best possible steward of the resources God has blessed you with—people, property, and cash.

As with any priorities, the order of these four can change based on the current church situation, but frequent review and discussion can ensure that your church is putting the proper emphasis on good stewardship of the resources God has entrusted to you through your givers.

Over the coming weeks, I’ll unpack each priority in more detail and also share about an exciting tool that we’ve developed to help your church with the process of managing your financial priorities.