Purpose: To help leaders understand that responsible financial stewardship is a major component to his ministry description.
- The leader will understand general principles and specific WOL processes regarding accounting, budgeting, secure giving and donor management.
Accounting and Budgeting
You don’t have to be an accountant in order to be a Field Director, but you do need to have your finger on the pulse of your financial picture. On some fields there will be a dedicated financial manager, but if you’re just starting out or your field is still developing, that person may be you.
Let’s start with accounting. Here’s some basics that you need to begin to think through:
- Bank Accounts. This is one of the first steps for virtually any field. You will want to get set up at a reliable bank that can hold your assets for you. You don’t want to keep large amounts of cash on site. Set up an account and then set up a schedule for when deposits are going to take place. Check with the bank to see if they want your deposits in a particular format or order.
- Expense Tracking/Bookkeeping. This can be as simple as using an Excel spreadsheet or as complex as using advanced Accounting software. The principle is this: everything that can be tracked should be. Get into the habit of entering everything into your tracking program, and develop a system to make sure employee expenses are also tracked. The Home Office can help you get this going, if needed. Our default operating system that we set fields up with is QuickBooks.
- Payroll. Do you know how missionaries on your field get paid? Is it effective? Do you know how to run payroll, if needed? At the outset of your ministry you will need to decide a payroll schedule (frequency that employees/missionaries are paid) and that you’re withholding the right taxes. If you’re uncertain, a local accountant or banking officer would be able to assist you.
Having large amounts of cash on property is ok if....
- You live too far from a bank.
- You have good, trusted neighbors.
- It's not ok - make the practice of putting it into a bank.
Basic Budgeting Concepts
You’re probably familiar with what a budget is and how it works, even if it’s been based on your own family. Budgets need to be written annually and submitted to the home office for approval. Budgets need to be written in the ‘black’, meaning, you’re bringing in more revenue than you’re spending. There are some exceptions to this but they’re rare. You may have someone who is responsible for writing your Field’s budget, but as the Field Director you will be the one ultimately responsible for it. You must ‘own’ your budget. That being said, consider the following:
- Financial risks. What this means is this: something that may be producing revenue for you today may not be tomorrow. If your market shifts or you need to end a particular ministry today, what impact would that have on your overall ministry? How might you use your team and some recent data to help you understand what ‘climate’ your ministry may/may not be heading into?
- Overestimating Expenses. Rarely will a ministry under-spend their budget – the opposite is typically what happens. Always budget a certain percentage more than you anticipate actually spending to allow for the unforeseen.
- Revenue Cycles. Every ministry and every business has times when sales are up and sales are down. In ministry this can be very threatening if cycles are not forecasted accurately and prepared for in the budget. So, expect revenue to be up during camp but expect it to be down after camp. Except revenue to be up at the start of the Bible Institute year, but expect it to be down in the middle of the semester. Planning in your budget for these guaranteed cycles can really save some headaches later.
- Plan ahead for large purchases. You don’t have to know when you’re going to have a computer burnout; you just have to know that it’s inevitably going to happen. Some of these things can be planned for almost annually (like a computer problem) – other things you may not see it coming. There’s not much you can do with the things that happen that no one could have planned for, but it’s unfortunate when we’re not planning for purchases that we’re almost guaranteed to incur (computers, vehicles, etc). These necessary items that eventually wear out should not always be funded by an appeal to a donor. The donors will eventually begin to question your foresight and planning.
- Time is money. In other words, missionaries that are multi-tasking between 2 areas of the ministry should be reflected in the budget. If a missionary spends 90% of their time in the Bible Institute and 10% of their time in camp, then the salary line of the budget should reflect that.
Some budgeting questions...
- Market 'shifts' can have a significant impact on ministry revenue.
- Revenue cycles are normal for a ministry and shouldn't impact budget planning.
- Don't worry about planning for large purchases - just be ready to call a large donor if needed.
Additional financial insights...
- Most financial management experts recommend that organizations maintain operating reserves equivalent to at least three months’ worth of expenses, while acknowledging that for many organizations, higher levels would be prudent. Several recent studies have shown that a majority of non-profits don’t have three months of reserves, and many have no reserves at all.
- The field director helps the board carry out all its financial responsibilities, which include approving the annual budget, reviewing and accepting the external audit, and monitoring financial performance throughout the year.
- The field director is responsible for presenting the annual budget and interim financial statements in a timely and accurate manner for review and action by the board, for making sure that the audit proceeds on a schedule and that the organization can provide information and documentation needed by the auditor.
- In situations where field directors have limited financial expertise or lack confidence in their abilities, an important part of the chief financial officer’s role is to build the executive’s skills and capacity, rather than developing an independent relationship with the board around financial issues.
- Word of Life will be providing specialized training in the MRIC (Missionary Reporting and Information Center) and how to file EOM (End-of-Month) reports. If you’ve never had this training before or perhaps needs a refresher, the home office will be contacting you to facilitate this.
What do you think? In your field...
- Do the field director and board regularly receive timely and informative financial reports and projections that help them make decisions? If not, why not, and what immediate steps could we take to address the problem?
- Do we have adequate operating reserves or a realistic plan for building our reserves?
- If a major donor were to offer us an unexpected gift of one million dollars, do we know how we would use that money?
Share your thoughts on this statement...
“The leader of a ministry isn’t required to concern himself with the financial stewardship of the ministry, but rather he is to have the single focus of sharing the gospel.”