Managing Church Finances in these Times – Balance Sheet, Liquidity and Cash Management

Managing Church Finances in these Times – Balance Sheet, Liquidity and Cash Management

Church Finances Part 4
Michael Batts, CPA presented a webinar entitled “Church Financial Management in Challenging Times”. He makes some excellent points regarding your cash assets, or liquidity. We have summarized some of his webinar here for your convenience.

The expression cash is king has never been more relevant than to all of us affected by the Covid pandemic. It is good for a church to have three-months of operating expenses in reserve and it is excellent for them to have six-months operating expenses in reserve. The reserve is for times just like this, keeping in mind these funds need to be replenished. What other resources and tools are available to assist you during these times?

Congress passed the CARES Act which includes the PPP: Payroll Protection Plan for which churches are eligible to apply. This loan may be 100% forgiven based on the plan details. Any church with less than 500 employees may apply. Your local bank will process this loan through the SBA and you should contact them. The application is short and will most likely include you providing current financial statements and payroll registers. These funds may be forgiven if used for payroll, mortgage and/or utility payments. Additional funds were currently approved by Congress and applications are still being accepted. Church Law & Tax has great resources regarding this loan/grant.

Another consideration is that your current annual budget may be largely irrelevant at this point. It is important to review and perhaps even consider a rolling 12-month budget. See our previous blog.

Also, Mr. Batts suggests dynamic cash flow review. Consider a simple spreadsheet modeled below with several scenarios. Consider creating one mode with giving remaining flat, one with giving increase and/or giving decreasing. Prepare this cash flow week by week with your best estimates and replace with actual numbers as the weeks pass.

ABeginning Cash Balance$XX
BCash Inflow (including borrowing)$XX
CCash Outflow (including debt servicing)$XX
DNet Cash (B-C)$XX
EEnding Cash (A+D)$XX

You might want to include below this model some of the details making up lines B & C each week. This should be a “living” model, updating cashflow as actual transactions and information becomes available.

Does your church have financial records? Are they current? Do you have the ability to adequately manage your cash flow and assure your liquidity?

Take a look at GoodBooks today and see how we can help you maintain good books starting at only $40/month.

Book an appointment today to see how GoodBooks can help.

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