Revenues dropping? When should you talk with your bank?

(Originally published as an article within ECCU’s former e-publication, Ministry Banking Today.)

When you find yourself in trouble, who do you call? Your pastor? Your stock broker? Your mom?

Ministries need a lifeline too. Even as the vast majority of them continue to meet their financial obligations despite flat or declining revenue, many are experiencing cash flow challenges and watching their reserves dwindle. When your ministry faces financial hurdles, who do you turn to for advice? While some may think of their financial institution as the last place to call in troubled times (“Why would I want to raise red flags with the people who handle my money?”), there are huge benefits to having a conversation with your bank or credit union at the first signs of financial distress.

Here are a few indicators it may be time to make that call:

A downturn in giving—especially if you haven’t adjusted your expenses to match your new income. Sometimes those adjustments are really difficult, and an early conversation with your bank or lender can help you come up with a plan.

Additional increased expenses due to a rising number of attendees, but not givers. In this economy, more people are coming to church and seeking ministry services but are not yet active supporters. If you notice that your expenses are going up along with your attendance, while your income stays flat, talk to your banking resource about how you can continue ministering effectively.

You’re responding based on history rather than current economic realities. If your ministry often justifies expenses by saying, “We saw a downturn like this three years ago, and we bounced back in a few months,” be careful. More than likely, these are unprecedented times in your ministry. For example, before 2008, three months of reserves was wise, but today you need more like six. A relational banking partner will help you identify economic shifts and create appropriate goals for your ministry’s current realties.

Bottom line: Call your financial institution as soon as you see things that could affect your ability to continue ministry, pay staff, and stay current on your mortgage.

What is this kind of call all about? It’s not a confession. It’s a call to what is, hopefully, a resourceful consultation. One of the benefits of having a banking relationship—as opposed to simply making banking transactions—is that you view your financial institution as a trusted advisor who can talk you through questions like:

  • How much of a reserve fund do we need? Do we have enough now? If not, what can we do to beef up what we have today?
  • How much of our income should go toward salaries? Is 80 percent normal? What about a debt service ratio? What is appropriate for our ministry?

Your financial institution should also ask you some key questions to help unveil potential pitfalls in your operations. Even simple questions can be surprisingly revealing. Questions like:

  • How does money come in?
  • Where does it come from?
  • What do you do with it?

One church discovered that waiting until the end of the week to deposit Sunday’s tithes, was costing them significant amounts of money from lost interest over the course of the year. Another ministry thought they were practicing dual control with their donations, until their credit union helped them see that one person was actually counting the money while another was putting it in the safe, jeopardizing their accountability. Acting as a financial advisor, a true banking resource should help you identify risks and problem areas—and ways to strengthen your ministry.

Looking for resources to help you prepare for that conversation with your financial institution? Check out the white paper Liquidity: How Much Is Enough? You might also consider signing up for the Church Leaders Summit at the upcoming Christian Leadership Alliance National Conference, April 19–21, in San Diego, California. A number of the sessions will address issues mentioned in this article, including a Liquidity Management Workshop.

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