Mike Boblit is an ECCU regional director. Randy Marsh is a senior relationship manager. Here are my questions and their responses.

MBG: What is one requirement to qualify for a commercial loan that is dramatically different today than it was four years ago?

Mike: Cash flow requirements are much more stringent. Previously, if a potential borrower could demonstrate the ability to achieve a 1:1 cash flow ratio ($100 in available cash flow for every $100 in debt service), either by past performance or a well-defined budget, lenders could get comfortable making a loan. Today, a prospective borrower must have a consistent 1:1.25 cash flow ratio ($125 in available cash flow for every $100 in debt service). This must be demonstrated with historic cash flow performance, not just a budget that projects cash flow.

MBG: How does a ministry decide how much debt is too much for them today?

Mike: It’s similar to determining the correct amount of debt for your ministry. Too much debt is any amount that a ministry cannot budget and set aside before taking on the debt. A ministry that thinks it can handle $200,000 in annual debt service should budget that amount several years before incurring the debt to insure that they can live with it.

Here’s a rule of thumb: Your ministry’s personnel costs (e.g., salary, benefits, housing) and debt service should not exceed 65 percent of its total income.

MBG: Randy, you worked with a lot of ministries that struggled financially during the recession. How important did you find strong leadership to be when tough times hit?

Randy: Though most ministries survived and many thrived during the economic downturn, an alarming number failed. In most cases, the recession did not directly cause these failures; it revealed other, correctable pre-existing issues. One was inadequate leadership and financial accountability. Leaders who best navigated the Great Recession demonstrated three best practices. They were proactive, accountable, and attentive to spending (not just giving). Proactive means they made hard choices, like laying off staff in time to avoid worse financial difficulties. Accountability means having the right people involved in financial decisions. In some cases, key leaders were unaware of spending decisions until the ministry was facing foreclosure. Finally, good leaders’ calls for increased giving were accompanied by spending cuts.

MBG: How important is cash flow when a ministry is applying for a loan?

Randy: When the economy was booming, many churches took the “If you build it they will come” approach. Even if attendance fell below projections, they could usually get by because attenders’ incomes kept increasing. In hard economic times, many families’ incomes dropped, and their charitable giving did too. Job insecurity led many people to give less and save more. The impact of these realities is that, as Mike said, a ministry’s ability to show sufficient cash flow is more important than ever.

Mike and Randy will have much more to say about how the Great Recession reshaped the lending landscape at a webinar being presented by the Christian Leadership Alliance on Thursday, June 27, from 9:00 to 10:00 a.m. (PT). When I asked Mike for an important takeaway attendees could expect, he said they’ll get a good overview of current lending criteria and learn how lenders determine the credit worthiness of potential borrowers.

 For more information and to register for How to Look Like a Healthy Borrower, visit www.eccu.org/cla-webinar.

We’re also partnering with Brian on a June 20 webinar to report the research findings and talk about how they can help ministries. For a preview of what he’ll present in the webinar, I asked Brian a few questions about this year’s research. Here’s what he had to say.

MBG: What were some surprises in this year’s State of the Plate survey?

Brian: Our research revealed a number of surprises. Here are three:

• 17% give off their net income, while 70% base their giving off their gross income and financial blessings.
• In nine categories of financial health, Christians who donate 10% or more are better off financially than those who do not give at least 10%.
• Sadly, very few faithful givers currently plan to leave bequests in their estate. Only 25% are leaving a gift for their church, and even fewer, less than 11%, are leaving gifts for Christian organizations or mission agencies.

MBG: What are a couple key insights about tithers that every ministry leader should know…and why?

Brian: Tithing starts when people are younger. 63% started in their twenties, teen years, or as children. Only 17% started after age 40. Churches especially need to use generosity devotionals and other materials that allow people to discuss generosity and giving as a family, so a new generation of young givers can be raised up.

Another insight…churches must offer various ways for people to give. The debate used to be whether to pass the plate or have a box in the back. Today the answer is to pass the plate, have a box in the back (for those who weren’t ready when the offering was collected), offer EFT and online giving, provide mail-in self-addressed envelopes, set up stock brokerage accounts to receive stock gifts, and think hard about iPad, smartphone, and kiosk giving.

MBG: The survey suggests that generosity is learned behavior. What are some effective ways of teaching people to be generous?

Brian: No one is born generous…or born-again generous. Every person is on a generosity journey and needs help to grow in the grace of giving. Every survey participant indicated that the Lord used a variety of things to teach them to be more generous.

The most ineffective way to teach giving is to focus on the budget. Generosity should be taught because of the Bible, not the budget. A budget should be seen as a spending plan, not the giving goal. It is not just about financial transactions, but also about spiritual transformation. Biblically-based financial sermons and classes, generosity devotionals and other generosity materials (e.g., pamphlets, bulletin inserts, offertory videos, Scripture verses on the screen during the offering) are all helpful ways to teach and encourage generosity year-around.

MBG: What are some important takeaways attendees will learn during the June 20 webinar?

Brian: Information never before revealed about the best practices and trends of the most generous group of givers in every congregation. Attendees will also gain access to the full eReport (20 Truths about Tithers) with 26 graphs and infographics. I’ll also talk about five keys to create a culture of generosity and 50 best practices to inspire greater generosity.

Follow this link to learn more about and register for the Truths about Tithers webinar.

Your admin assistant’s brother-in-law’s dentist’s cousin. Look hard enough and you’ll probably find a volunteer (or volunteered) person who’s willing to donate their expertise. Your challenge is to assess their abilities and whether they fit your needs. Some questions to ponder:

1. How critical is this particular need to your organization? Can you risk costly bad advice with no recourse to recover that cost?
2. Are the volunteer’s qualifications relevant to your situation? “I installed a wireless router in my house” doesn’t qualify someone to touch your network. Look for expertise that’s rooted in diverse experience. And if checking references on volunteers seems rude, you’re accepting risk by not doing it.
3. Do you have multiple “experts” who can validate each other’s ideas?
4. If someone is actually doing work and not just offering advice, will you require ongoing support and will that person be able to provide it? If not, and they build something like a database, website, or app that needs ongoing maintenance (they always do), you could end up with a system you can’t maintain and be forced to hire someone who can. Free can be expensive.

A sales rep. Even if they call it consulting, their job is to sell you their product. Document your needs before you talk to vendors, and resist their suggestions to add features that aren’t on your list. Talk to more than one vendor, and ask each one why they don’t offer features their competitors say you need. Free can be expensive.

Consultants. Sometimes paying a consultant, even a high-priced one, is the least expensive way to get the job done. But you have to find one who understands your needs. Look for experience with organizations similar to yours in size, needs, complexity, and culture. No consultant is unbiased, since everyone tends to recommend products they’re most familiar with. But a truly independent one will work with multiple products and competing vendors. You may need to challenge your hired gun’s recommendations to make sure you get solutions that fit your needs.

We may gulp as we sign that check, but good stewardship means not being penny-wise and pound-foolish. If you’re spending thousands of dollars on new technology, a consultant who helps you get it right the first time can save more than enough to cover their cost.

Expensive can be free (or at least pay for itself).

According to a survey recently released by the Federal Reserve Bank, 15% of mobile phone users have purchased something with their phone in the past 12 months. The most common “purchase” is online bill payment, which may include a donation to your ministry organization.

Smartphones are also changing the way people make their buying decisions. 42% of smartphone users have used their phone to comparison shop while they’re at a retail location. And 32% of these users have used it to check prices by scanning a barcode.

How does this increasing use of mobile technology affect the way donors interact with our ministry organizations? It sure prompts a question: How easy do you make it for someone to donate using their phone? In a recent blog, Make Your Ministry Website Mobile Friendly, I offered eight tips that directly influence whether a mobile phone user will donate to your ministry.

All the experts I follow see an evolution in the way we interact and pay for things and say the next two to five years will bring significant changes in how we handle our money. Many of these changes will be tied to the use of our phones.

What are you doing at your ministry to anticipate these changes? At my church, I’m thinking about printing a QR code in our program so people with smartphones can more easily go to our online giving page.

What ideas do you have?

Does your pastor receive fees directly from individuals or families for performing marriages, funerals, or baptism services? If so, are these fees for professional service considered taxable income to the minister?

The short answer is yes. This practice has probably been going on since ministers began performing these functions. Your church may even suggest an appropriate amount for the family to give the minister.

According to the IRS (Treasury Reg. Section 1.61-2(a) (1)), “marriage fees and other contributions received by a clergyman for services” are considered income for the minister. However, since the fees for these services are paid directly to the minister from the family, the income would be considered self-employment earnings and not employee wages. Thus, this income would need to be reported by the minister on Schedule C of their income tax filings. So the church is not required to account for or report this income to the minister.

However, if your church pays other staff for functions performed, such as coordinating weddings or funerals, leading music, operating sound/technical equipment, or doing custodial work, the church is responsible to report these earnings on a W-2, since these people would all be considered employees for income tax purposes. And remember, overtime rules apply for this work as well.

I find it best to remind our pastoral staff of this requirement to report any income received for professional services so they don’t get into trouble for underreporting their income.

As you’d expect, since I’m talking about taxes here, I must offer the following caveat: This post is provided by ECCU for educational purposes only. It is not intended to be legal, tax, or accounting advice. ECCU disclaims any liability arising out of your use of or any financial position taken in reliance on information provided in this post.

 Evangelical Christians are also the faith group that donates the most: 26% donated $2,500 to $5,000, and 6% donated over $10,000. This compares with a national average of 7% and 1% respectively in these amount categories.

 So the survey says that evangelicals do in fact donate more than others. Does this surprise you? Would you expect this?

 If we follow Jesus’ teaching, we should be the giving the most, because we understand that we have the most to be thankful for in the gift of God’s forgiveness through Jesus’ sacrifice. Plus, we understand that we are to be shrewd stewards of the resources we’ve been given.

 A question we should all be asking: “Am I a generous giver regardless of what the survey says?”

I know this question is on ministry leaders’ minds because so many of them signed up for ECCU’s recent Advanced Budgeting webinar. So I’m looking forward to presenting an educational session on advanced budgeting at the upcoming Christian Leadership Alliance (CLA) 2013 National Conference in Anaheim, California. And I’m thrilled to be co-presenting with Caryn Ryan, whose credentials couldn’t be more impressive.

Caryn is the managing member and founder of Missionwell LLC, a full-service accounting, finance, and virtual office solution that exclusively serves nonprofits. She has extensive experience in major industry settings like Amoco Corporation and nonprofit settings like World Vision International, where she served as CFO.

To set the stage for our session at CLA, I asked Caryn a few questions about budget building.

Mark: Caryn, what are some strategic steps budget planners of large organizations should take to ensure that the process heads in the right direction?

Caryn: The most successful budgets have senior executives driving them. If the budget is a finance/accounting department effort only, it’s going to be less successful. Beyond alignment with the strategic plan, it’s helpful to have clear goals or business imperatives for the budget for the coming year. Examples might be absorbing new activity without affecting fixed costs, taking a deeper dive into the effectiveness of specific programs, freeing up funds to establish an operating reserve account of $XX without disrupting operations, or even starting a critical program when funding is at 60%.

Mark: Many ministries experience tension when it comes to aligning money and mission. What are some guiding principles or best practices to assure that a ministry’s budget reflects priorities?

Caryn: Aligning money with mission sounds easy, but is surprisingly hard to do! Start by listing out your strategic objectives/priorities, then translate them into strategic goals. Next, lay out multi-year strategies to achieve the goals. This is where the budget starts to come in. Each strategy (program or activity) requires direct resources, whether people and/or program dollars. Identify the direct resource (people and/or dollars) for each strategy at the level required in the budget year to achieve the longer-term goal.

Now the fun begins! Start a conversation to help answer these and other questions:

• Are resources available to fund all strategies?
• Do goals need to be adjusted?
• Are fixed costs and overhead affordable?
• Do programs or activities seem to move the organization towards its goals quickly enough?

The heart of the budget is to move the organization toward its goals efficiently.

Mark: What are some keys to assuring that a budget serves the organization well after it is approved?

Caryn: The simplest way to keep a budget alive is to consistently report actual results compared to the budget. Color coding variances can highlight the ones that are significant and require attention. Focus staff and teams on those variances. Also, keep in mind a budget doesn’t have to be completely financial. For instance, you can budget the non-financial elements of your balanced scorecard and report against those variances, too.

Budgets die after approval if they are not used as accountability tools!

If the organization doesn’t have a system of accountability, that should start with the board. The board negotiates with the president/executive director on what elements he or she will be held accountable. This may mean employing a flexible budget/agreement on what is and is not controllable in the year, or a range of acceptable outcomes around key line items. Pay increases, bonuses, and other rewards should be linked to achieving budget goals.

Another part of the accountability spectrum is staff—paid or unpaid, outsourced or direct employees. Once strategies have been funded in the budget, then people can be linked to the strategies. Typically, this is expressed as a percentage of a person’s time against an annual performance goal. The budget stays alive for the individual through their team meetings and meetings with supervisors as they compare actual performance to objectives aligned with the budget.

Lorraine Mazza is managing director of development with Joni & Friends International Disability Center. She’ll participate in an educational session on giving that ECCU is presenting at the Christian Leadership Alliance 2013 National Conference in Anaheim, California.

“Don’t think only about your own affairs, but be interested in others, too, and what they are doing. Your attitude should be the same that Christ Jesus had.” (Philippians 2:4–5)

I have been asked so often about the guiding principles for working with major donors and how our ministry has been blessed with success in this area. I always respond in the same way: “Keep it personal.” Let me explain.

As Christians, we live in and are influenced by the secular world. Our high-tech, high-speed lives have often been created at the expense of true personal relationships. Much of what was once considered social graces has been replaced by expediency, creating the oxymoron “virtual personal relationship.” In the business world, companies must turn a profit. If it saves money, it’s “good.” Consequently, mechanical voices have replaced that all important first human touch with customers. Acknowledgements by email have replaced personal thank-you notes. Too many times the end (profit) justifies the means at the expense of personal contact.

For the Christian nonprofit, this rapidly widening cultural shift creates opportunity. We live in a world where a simple and consistent policy of building a personal relationship has become a distinct competitive advantage. As Christian fundraisers, we have committed our lives to a Savior that requires a personal relationship with Him and requires that we reach out in a personal way to others. The art of the personal relationship shouldn’t be left out of the development department. We should be the champions of personal relationships.

Fundraising, especially among major donors, cannot succeed unless it is fully integrated into the ministry culture from the top down and accepted as ministry itself, providing a service to the donor.

All fundraising is ultimately about personal relationships and about ministry to our donors and donor prospects. We cannot minister and bless these people unless we have developed some kind of personal relationship with them. To “keep it personal,” we must know our donors. Why did they give to our ministry? What is it about our ministry that drew them to us? The only way to answer these questions is to personally ask them. That means seeing people in person, calling them on the phone (without asking for money), or acknowledging them with a handwritten note. It means we ask for their prayer requests and pray for them. When we do this, we bless our supporters and all those our ministries serve.

Our desire is to honor God in everything we do. The secular world often seeks to be served by asking, “What are you going to do for me?” But the Bible tells us to put others first and ask, “How may I serve you?”

Bob Ball is a senior vice president and executive creative director for Masterworks, a leader in the non-profit industry in branding, analytics and constituent marketing, donor engagement, and integrated online/offline marketing. He’ll participate in an educational session on giving that ECCU is presenting at the Christian Leadership Alliance 2013 National Conference in Anaheim, California.

Donor-focused stories prompt the most response. Stories that are written to the donor, for the donor, and about the donor.

Far too many newsletters are all about the organization. Such newsletters—I call them “Navel-Gazing Newsletters”—talk all about the news, the programs, and the accomplishments of the organization.

Donors are interested in what their money has accomplished.

Sometimes newsletters attempt to serve many different masters. These “All-Things-to-All-People” newsletters are created for several different audiences (in addition to donors). For example, some organizations use their newsletter to communicate with donors, volunteers, employees, board members, the media, and even the general public. This desire to be all things to all audiences makes it difficult to effectively focus on any single audience.

When the newsletter devolves to this point, it usually doesn’t make anyone happy and slides into irrelevancy.

In recent years, my colleagues and I have resolved to do something about this sorry state of the newsletter. We started by attacking the problem at the root. We decided to reverse the diffused audience focus and create newsletters with an obsessive, laser-like focus on donors.

The result is the Extreme Donor-Focused Newsletter. It is aimed squarely at the donor. In fact, it is all about the donor. This approach assumes donors give because they love to give and love to make a significant difference in the world. It combines reporting about what the donors have accomplished and offers them a clear opportunity to give again.

One major theme of the newsletter needs to be how important the donor is—“Look at what you have accomplished! With your help, we can do all this. Without your help, we will not be able to do it.” Look for ways to use the words “Thank you!” over and over again. It’s almost impossible to over-thank donors. (This is not merely a report back about what the organization was able to accomplish. This is all about what the DONOR has accomplished through their generosity!)

Giving is joyful. I can’t emphasize the importance of this simple fact. Donors—real donors—love to give. Your faithful, loyal donors are the people who give over and over again, and keep giving. They are not stingy grouches who must be cajoled and manipulated into reluctantly parting with their money. No! Real donors have discovered the secret of true happiness and all they need is assurance that their giving is appreciated and effective.

This key message should be explicitly stated: “Nothing feels better than when you help. When you give to accomplish XYZ, you know the joy of making a significant difference in the world!”

Just as in our personal lives, putting money aside takes intentionality and discipline. Helping a ministry understand why cash reserves are so important is a first step in this process. Here are the three main reasons a ministry needs to maintain cash reserves:

Cash Flow Fluctuation. Revenues and expenses don’t always match up (or come in and go out at the same time). For example, many ministries will get a significant amount of donations at year-end and need to rely on those funds to pay expenses that occur during the remainder of the year.
Unplanned Events. We all know “things” happen that we haven’t planned. Even the best prepared budgets don’t anticipate everything that might occur. Having cash reserves set aside is critical to being able to cover these items when they occur.
Potential Opportunities. What opportunities, if presented, would you want the ability to act on immediately? To take advantage of a God-given opportunity, you will most likely need access to some funds before you have time to raise them.

Just as each ministry’s mission is unique, the appropriate amount of cash reserves is also unique to each ministry. It takes discipline to determine your ministry’s needs. Start now, or you may experience unnecessary pain and risk troublesome problems that could have been prevented.

Check out our white paper Cash Reserves: How Much Is Enough? It will help your ministry determine what level of cash reserves is appropriate for your ministry.