We have witnessed churches and schools that appear to operate somewhat blindly, as though stopped in time, living in practices of the past, a past that enjoyed a more stable and abundant economic environment and a much larger “volunteer” religious workforce. In some cases today, financial juggling enables the continuation of programs and practices that are neither viable nor sustainable. We observe the financial juggling in many (albeit, well intended) forms: drawing down reserves; not paying assessments, insurance premiums, and other bills; or, some combination of these practices. In a phrase, perhaps we share a growing concern over the quiet liquidation of financial resources.
Prudent Management Requires Financial Reserve
Prudent management of any organization includes building and maintaining an appropriate financial reserve as a hedge against temporary fluctuations in revenues or expenses and/or to fund capital needs. The distinguishing feature of these events is that they can be either transitory or have the effect of transforming cash into a depreciable asset. In either case, the financial health of the organization, over time, is maintained or enhanced. Today, unfortunately, accumulated financial reserves are being liquidated in a futile effort to reckon with recurring shortfalls or support unsustainable operations.
Informed or Uninformed Leadership
Informed or uninformed, this practice of the leadership of many churches and schools ultimately leads to a financial predicament. Emotionally wed to past practices and the status quo, they desperately need a genuinely dispassionate and objective interpretation of financial data by a third party to commence a data driven discernment and planning process. Organizations that, over a three-year period, annually draw down accumulated reserves in excess of $25,000, should be assessed to determine the long-term impact of such draws on the long-term financial health of the organization.
Our time-proven, data driven discernment and planning process classifies viable and sustainable entities. This mechanism enables leadership to evaluate options when a situation is still a “problem” rather than a “crisis.” Contact us today.