The first step in determining the appropriate amount of cash reserves for your ministry is establishing an operating reserves fund to be used for three purposes—cash flow fluctuation, unplanned expenses/events, and potential opportunities. To learn more about operating cash reserves, please review our white paper titled Cash Reserves: How Much Is Enough?
In addition to establishing an operating reserves fund, every ministry needs a replacement reserves fund for maintaining and replacing things that naturally wear out and break down around its facilities. This calculator will help you determine how much cash to set aside in a replacement reserves fund.
This simple tool will help you calculate an appropriate replacement cash reserves goal for your ministry. To use the tool successfully, please follow these steps:
|Step 1:||Update the inflation rate, as needed, based on your local inflation rate. The rate provided is the 2010 national average calculated by the Bureau of Labor Statistics (BLS), a unit of the United States Department of Labor.|
|Step 2:||List all the items that your ministry has to maintain or replace in the column labeled "Item."|
Provide the following information for each listed item:
Useful life (in years): How long the item was expected to last when it was new.
Remaining life (in years): If you're unsure what to estimate for the remaining life of a specific item, it may be worthwhile to consult with an expert.
Replacement cost: How much it would cost to replace the item today.
|Step 4:||Enter the amount you currently have in your replacement reserves fund in the bottom left corner of this form to determine your ministry's shortfall or excess in replacement cash reserves.|
As you provide this information, the tool automatically calculates the following for each item on the list (see the totals at the bottom of the form):
|Parameters / Notes||Future Replacement Cost||Replacement Reserves (Today)||Annual Replacement Reserves Contribution|
|Current Replacement Reserves:||Current Replacement Reserves Shortfall/Excess:||TOTALS|