Managing your organisation's finances: Remembering that cash is king

There is an old financial saying that “cash is king”. The reason being that if your church or organisation is going to run into financial difficulties, then a lack of cash (i.e. money held in readily accessible bank accounts) will almost certainly be the cause of it. So in managing your organisation’s finances it is important to understand your current cash situation, and to develop a cash flow projection that shows how that cash balance is expected to fluctuate over the short and medium terms.

When calculating cash, exclude money held in restricted funds, as this is not available for general use. Designated funds can be included, but may require the trustees to remove the associated designation.

When drawing up a cash flow projection explore both sides of the cash flow equation. From an income perspective: Will offerings hold-up? What happens to rental income? What about other activities? Is there a place for a special appeal?

From an expenditure perspective: what expenditure is essential? What activities would you like to keep going? What spending can be stopped immediately? Consider the various forms of financial help that is available, a mortgage holiday, a Government backed loan etc. It is also a time to be cautious about entering into long-term financial commitments (e.g. leases) as part of protecting cash at times of uncertainty.

Using that data, construct a simple cash flow using perhaps just a few lines to record inflows and outflows. Be prepared to re-visit and adapt the cash flow regularly and often as reality replaces estimation. Draw up action plans in the event that available cash drops below pre-determined trigger points. Implementing an already considered, agreed and prayed through plan will be far less stressful and problematic than trying to devise one “on the hoof”.

Our resource 'COVID-19: Financial planning and reserves for churches and charities' fleshes out the whole cash flow projection process in more detail, concluding as follows:

• Firstly, pray and do not panic, then
• Understand your current situation
• Construct a cash flow projection
• Plan for all eventualities – even those you dislike
• Communicate openly and often
• Be prepared to adapt
• Keep praying.

The outworking of COVID-19 is inflicting serious financial damage on economies across the world. We need to prepare for what will emerge on the other side, called to being people of faith and not just people of finance.