We help you give and we strengthen the causes you give to

Generosity is our cause

Submenu title


COVID-19: Financial planning and reserves for churches and charities

12 min


During the past few weeks financial normality has been completely disrupted, as governments, businesses, other organisations and individuals seek to come to grips with the financial implications of dealing with COVID-19. This is no different for churches. Many churches are justifiably concerned about cash flow; already seeing or expecting donations to fall and wondering how best to cope.

As a church leader, treasurer or trustee, now is not the time to panic, but rather, the time to plan ahead. Making decisions “on the hoof” is stressful, and can sometimes lead to poor outcomes. Planning for the future will help reduce stress and provides a window for prayer and reflection to consider the implications of decisions made.

Where to start?

Cashflow Projection

What about reserves?


Where to start?

Before starting to climb any mountain, climbers establish a base camp. So as we address this current situation in our churches, what represents a financial “base camp”? We suggest that for church leadership teams, this requires a good understanding of:

  • Starting cash* situation
  • Ability to access cash
  • Various income streams
  • Expenditure
  • Help that might be out there

* Cash in this context is money held in church bank accounts that can be readily accessed.

From this base camp, you can go on to construct a meaningful cash flow and draw up a series of plans that can be adapted as circumstances change and develop. There is an old financial saying that “cash is King”. Whilst this is not true for churches where Jesus is of course King, you get the point. If your church is going to run into financial problems, a lack of cash will almost certainly be the cause of it.

Starting cash situation

Cash in most churches falls into three pots, and it is important to be clear about what cash is available to the church.

Pot 1 – Restricted funds. Where cash is held as part of a restricted fund, this is not available to the church for general use. Cash held in restricted funds can only be used for purposes that meet the restriction of the fund. In its most recent guidance, the Charity Commission has confirmed this position.  In certain cases it may be possible to borrow from a restricted fund, but this is not a straightforward process and we suggest it should only be undertaken after seeking legal advice.

Pot 2 – Designated funds. These are unrestricted funds that have been “earmarked” or set aside by the trustees for a specific use (e.g. building maintenance, youth worker etc.). It is likely that these funds can be used for general purposes but will normally require the trustees to remove the designation.

Pot 3 – Unrestricted general funds. These are funds available for general expenditure in accordance with the church’s charitable purposes.

So, cash held in Pot 3 and, more often than not, Pot 2, will provide a church’s starting cash position.

Ability to access cash

Two things to consider here:

  • Are your various bank mandates up-to-date and do you have contact with those people authorised to access funds? This may be a problem if you have had cash held in a deposit or other bank account for many years without realising that the people on the mandate are no longer a part of your church.

Where possible, amend those mandates and if you can, increase the number of people able to access bank accounts in the event that your main “go to” people are unavailable (illness or perhaps internet connectivity).

  • Do remember that some term-deposits require notice or a loss of interest before cash can be accessed. On the whole this should not be an issue but might be worth a few moments research, particularly as banks will have other short-term priorities.

Look at your income streams

Look at your main income streams and consider the likely impact on them over the next month; three months; and dare we say - six months.

  • The impact on donations will be dependent upon:
    • The reliance that your church has on donations received at church services and its ability to convert these into online gifts
    • The make-up of your donor base.

Churches more reliant on church service offerings may need to encourage donors to set up standing orders or make electronic transfers where possible. Remember that for those in self isolation or unused to internet banking this may not be realistic, so a 100% conversion rate is unlikely.

All churches should look at the make-up of their donor base and conduct an assessment of the financial impact that the crises may have on future levels of donations. Who within your church is most likely to suffer a loss of income? What particular business activities are coming under strain? What family situations are you aware of that might impact people’s ability to give?

  • Special appeal. It might be a time to consider a special financial appeal to the church congregation. Any appeal should be undertaken with sensitivity and understanding but there may be some in your congregation able to assist in a special way at this time.
  • Gift Aid. Where possible, we suggest that churches bring Gift Aid claims up-to-date.  Although we have not experienced this as of yet, it may be that the speed by which the Government can pay claims may slow down.
  • Income from other activities. Consider carefully the likely impact on income received from other activities:
  • Where church premises are let to other organisations:
    • What are the terms of the lease/rental agreement;
    • Regardless of those terms, will organisations actually be able to pay
  • To what extent will other activities be able to continue?


Inevitably, a certain level of expenditure will continue, but by allocating expenditure into silos, planning for future cash flow is more straightforward.

  • Silo 1 – Expenditure that is fixed or that is essential for your church to continue operating. This might include mortgage repayments (although see below), certain staff salaries, software licences etc.
  • Silo 2 – Expenditure that you would prefer to keep going for as long as possible e.g. some staff salaries, payments to mission partners, relief payments to families suffering financial hardship etc.
  • Silo 3 – Expenditure that is no longer necessary and can be stopped immediately or after giving a short period of notice. This might include heating and cleaning of church buildings and perhaps some administration costs.

Explore the financial help that is out there

Government and other institutions are making financial help available in different ways, so take some time to explore and understand the various schemes and how they might apply to your situation. 

Some actions to consider might include:

  • Applying for a mortgage holiday
  • Considering the help for employees and determine whether you want to furlough some staff. The furlough scheme continues to develop, but remember when furloughed, staff are not able to work at all in their role, and may be limited in their volunteering.
  • Approaching leaseholders to negotiate a payment reduction or payment holiday
  • Exploring help provided at a denominational level
  • Seeking commercial loans – although we expect that to be difficult 

Cashflow Projection 

Armed with this information, you can now construct a simple but effective cash flow projection for your church. This projection needs to be a living document able to be adapted and amended at short notice as reality and experience starts to shape estimation and projection. Here is a step-by-step suggestion as to how you might want to proceed.

  • Step 1 – Construct a simple cash flow based on your current situation before making any assumptions and adjustments as a result of the current COVID-19 situation. Use the previous three months cash flow as a basis for the projection.
  • Step 2 – Consider your church’s income streams and make a reasoned projection of how these might change. Be realistic, and be prepared to amend your projections (up or down) as reality starts to unfold. Some churches may see only a small or no initial decline in income; others may see a much more rapid decline. There may be those in your congregation able to help, so there may be some pleasant surprises along the way.
  • Step 3 – Reduce or remove expenditure in silo 3 (on the basis that you have in fact turned the heating off and taking other necessary measures). When it comes to furloughed staff, we suggest that rather than reducing the cost line, you add an additional income line into the cash flow to show the government contribution towards staff costs.


  • There might be a time lag to receiving this income (at the point of writing the details of the mechanism are still being worked out)
  • At present, the scheme covers a three-month period; and
  • The scheme covers 80% of the cost.

It may be that by agreement with staff the church can save the additional 20% of salary cost, but it does not have the power to apply this reduction unilaterally.

  • Step 4 – Incorporate into your cash flow savings that you have been able to achieve as a result of negotiations with mortgage lenders, leaseholders or other suppliers.

This is your Plan A and reflects the changes made in steps 2-4. It is what you currently expect or would perhaps like to see happen. Click the link to see an example rolling six-month cash flow for XYZ church.

This church has:

  • Calculated opening available cash at £60,000
  • Anticipated 20% month-on-month fall in general offerings
  • Anticipated a sharp reduction in lettings and other church activities income
  • Been successful in applying for a three-month mortgage holiday
  • Furloughed 2 part-time administration employees whose costs were included in silo 2
  • Eliminated or served notice on all unnecessary expenditure in silo 3

Recognising that at this stage the income side of the cash flow is largely guesswork, after taking all reasonable steps on expenditure, available cash balances are projected to fall  below £55,000 in the next three months.

The next few steps are critical in providing a basis to determine the actions you will take next as your financial projection adapts to unfolding events.

  • Step 5 – Determine a level of available cash reserves that, once breached, triggers action to further reduce some or all of the expenditure remaining in silo 2. This trigger point should be set at a high enough to allow time for planned actions to take effect. For example, a church may choose to:
    • Furlough additional staff;
    • Reduce payments to mission partners;
    • Curtail certain activities, even those already moved online.

Be in no doubt, these are significant actions that will have a real impact on the lives of people and the effectiveness of your church. They should not be taken lightly, but by deciding in advance the required actions and the trigger points for them, these can be enacted quickly and efficiently. Remember, the situation might deteriorate faster than you expect, leaving little time to react without a pre-considered plan.

Remember that as you start to contemplate action, early communication is essential. For example, mission partners will need to consider alternatives if funding is to be reduced or curtailed, likewise the implication for your church in amending activities will need to be thought through. As a general rule it is difficult to communicate too much.

  • Step 6 – Once specific actions have been agreed, amend the cash flow in accordance with those actions. This then forms your Plan B. Remember that in the midst of this developing situation, there may be those within your church congregation that are able and that want to help. You may find some much welcome and wholly unexpected boosts along the road, especially where the church communicates great vision, emphasising the opportunities that there are to show the love of God to the world around us.
  • Step 7 – Set a new (lower) cash balance trigger point that, if breached, will result in further expenditure cuts. As with the previous trigger point, make sure that it is set high enough to allow time for the next round of actions to take effect.

At this point you might be looking to stop any remaining expenditure in Silo 2 and perhaps see what expenditure from Silo 1 could be reduced.

This is your Plan C.

Short of closing the church, Plan C probably represents all the actions that you can take, with expenditure stripped down to the bare bones. Hopefully Plan A or B will see you through this situation, but you should be prepared to move to Plan C if necessary.

What about reserves?

Reserves are there for times like these. I am reminded of Pharaoh’s dream and the interpretation that Joseph provides in Genesis 41:28: “God has shown Pharaoh what he is about to do. Seven years of great abundance are coming throughout the land of Egypt, but seven years of famine will follow them.” Reserves are established in those times of abundance for times of famine, so do not be concerned if you see reserves depleted below the levels that you would normally hold. The Charity Commission is clear when it says “reserves can be spent to help cope with unexpected events like those unfolding at present”.

Reserves are therefore very much a part of your cash flow planning. The extent to which they are used up will in some part depend upon:

  • The decisions that you make about when and how deeply you decide to cut non-essential variable costs; and
  • External forces over which you will have little or no control.


 So our message to treasurers, trustees and church leaders is:

  • Firstly, pray and do not panic; then
  • Understand your current situation – get to a financial “base camp”
  • Construct a cash flow projection – be prepared to amend and adapt frequently
  • Plan for all eventualities – even those that you dislike
  • Communicate openly and often
  • Be prepared to adapt
  • Keep praying.

As the Government debates an appropriate exit strategy from this current lockdown, there appears to be little prospect that we will be able to meet together as physical church for some time. The planning that you put in place now will hopefully mean that once that time comes, your church will be able to gear up and become fully operational as quickly as possible.

The outworking of COVID-19 means that real financial harm is being inflicted on economies across the world and as yet, we do not know quite what will emerge on the other side. But, what we do know is that God remains faithful and as church leaders and trustees we are called to be people of faith and not just people of finance. We need to be wise, but we do have a very big God!!