Don’t fear the bean counters!
Cash flow, balance sheet, and budgets, oh my! For most of us, dealing with finances rates right up there with getting a root canal. However, not dealing with finances can be much worse. Avoidance is not the answer! If you’re the CEO or top leader of your organization, you have to deal with finances. This means knowing how much money is coming in (revenue), how much money is going out (expenses) and where the money is coming from or going to.
Here are a few tips to get you started:
1. Find a qualified accountant – Do not hire your second cousin’s retired Aunt Susie just because she’ll work for free (or nearly free). You need someone who has 5-10+ years of accounting experience and preferably is a CPA (Certified Public Accountant). If your organization’s size doesn’t support a full-time accountant, find a small accounting firm who will do the bookkeeping for you and will charge based on the level of effort required. Don’t skimp on this one – you can buy used copiers and get hand-me-down office furniture but don’t go cheap on the accountant!
2. Develop and monitor your budget – A budget is a document that shows where you’re planning to receive and spend money each month for the upcoming year. At first, this is barely an educated guess but you’ll get better at it over time. So why have a budget if it’s a guess? Let’s say you decide to run a big event. You’ve got the right people involved, the idea makes sense to the team, and you’re eager to get started. You start spending money on marketing and supplies and then your accountant tells you there’s not enough money in the bank to pay the mortgage that month. How did that happen? It happened because you didn’t have a budget that included this event and how you’d pay for it along with your regular expenses. Does that mean you can’t do anything that’s not in your budget? Of course not! It just means that you should review the budget and make adjustments (either figure out how to make more money or cut back elsewhere) to fit the new event into your budget.
3. Review financial reports monthly – While the budget is your plan for how to spend/make money, financials reports tell you what actually happened. As you review these reports, you may want to adjust your budget in the upcoming months to reflect the additional information. Key financial reports include a Cash Flow Statement, Profit & Loss (P&L), and a report that compares the budget versus actuals for a given time period. Your accountant should provide these to you (and review them with you) each month.
4. Develop financial controls – An accountant you trust combined with distaste for dealing with finances may make you think that you can delegate the whole money issue. Wrong! No one likes to consider the possibility but fraud and theft are risks you need to guard against via certain control points. For example: Do not give your accountant the authority to sign checks or allow only one person to count cash / make deposits. Simple steps that bring accountability can prevent very difficult situations in the future.
5. Invite accountability for yourself – You should have a Board of Directors (people who don’t report to you) who you meet with on a regular basis. Reviewing the financials and the budget should be part of these meetings. I’d recommend sending them financial reports on a monthly or quarterly basis as well. They should also have the right to review your financial controls and/or to speak directly with your accountant. Consider bringing in an auditing firm once a year to review your finances and provide a report that summarizes their findings. There have been numerous instances in both non-profit and for-profit organizations of fraud that originated at the top of the organization. Invite accountability to make sure there isn’t even the appearance of wrongdoing.
People are giving to your organization because they believe in you and what you’re trying to accomplish. They are trusting that you’ll spend the money wisely, so don’t take their trust for granted. Following the tips listed above can help you handle your organization’s finances with excellence and good stewardship. When people see the results of how you’ve used the money they’ve donated, they’ll be inspired to continue to give generously.
What advice would you give people who are reluctant to get into the finances or create a budget?[socialring]
Is this you after a church event?
It doesn't have to be that way!
Let me help you start planning the next event with the Church Event Planning Questionnaire. I'll also send you tips on how to make the next event more successful, and much less stressful.
Simply fill out the form and I'll get the questionnaire to you right away.