The COVID-19 pandemic has created immense financial challenges for many churches and religious organizations. With in-person services suspended or operating at limited capacity, donations have declined drastically. This has put immense strain on church budgets and finance. As churches look to rebuild and recover, building financial resilience will be critical. Here are some tips for churches looking to strengthen their financial footing:
Diversify Revenue Streams
Relying solely on donations and tithing can leave churches vulnerable during economic downturns. When times get tough, charitable giving often declines rapidly. This leaves churches dependent on giving in a precarious position. That's why it's important for churches to diversify their revenue sources and not rely solely on donations.
Consider adding new revenue streams like building rentals, e-commerce, or fee-based programs. Renting out your building or facilities for events when not in use can provide a steady stream of rental income. Setting up a church bookstore online or on-site can also generate profits through sales of religious books, gifts, and merchandise. Offering fee-based programs like preschools, daycares, summer camps, or religious education classes can also supplement donations. These complementary income sources can provide financial stability when donations fluctuate.
A good rule of thumb is that no more than 50% of a church's budget should come from tithes and offerings. The other half should come from business income, rentals, fees, and other sources. Diversity protects churches from over-reliance on the goodwill of members.
Build Reserves
During seasons of plenty, churches should build their reserve funds and endowments. Setting aside cash in savings, investments, or endowments gives a buffer that allows churches to continue operations even when times get lean.
Aim to have 3-6 months of operating expenses in accessible reserve funds like savings accounts, CDs, or money market funds. This emergency fund can bridge gaps in cash flow if donations dip temporarily. According to a recent survey, the median church has reserve funds to cover just 1.7 months of expenses (Leadership Network, 2019).
For even more stability, build up endowment funds that are invested for the long-term. Although not readily accessible, large endowments can provide ongoing income via investment returns. This acts as a perpetual rainy day fund.
Cut Costs
Get strategic about cutting unnecessary spending. Examine line items across your church budget - staff, facilities, programs, events, etc. Evaluate all programs and activities based on their return on investment and alignment with the core mission.
Prune extravagances that don't clearly further the church's goals. For example, elaborate holiday decorations or excessive church supplies could likely be scaled back. But be careful not to cut essential ministries and staff. Surveys may help identify what the congregation views as most vital.
Large capital expenses like new construction should also be avoided during difficult financial times. While seemingly beneficial long-term, new buildings can strain churches in the present. Consider delaying major projects until finances improve.
Renegotiate Debt
If your church is carrying debt like mortgages, lines of credit, or loans, look for opportunities to refinance at lower interest rates. With rates declining in recent years, refinancing can dramatically reduce monthly payments and free up cash flow for other needs.
Also consider whether any properties, assets, or holdings could potentially be sold to pay down high interest debt. Even sacred spaces like sanctuaries may need to be sacrificed to restore financial health. If the debt payments are crippling ministry, eliminating debt may be the wisest stewardship.
Collaborate and Merge
Smaller churches can pool resources and get economies of scale by collaborating with other local churches. Consider sharing staff across churches - for example, one pastor serves two churches. Or co-host events, joint programming, and collaborative missions to share costs.
In some cases, mergers between churches may even be beneficial. Larger congregations created by mergers can optimize staff and resources. This builds sustainability for all parties involved. But mergers require deep counsel and discernment to navigate sensitively.
Invest Wisely
Churches should take care with their financial investments just like any other organization. Work with financial advisors to craft a customized investment policy statement aligned with the church's goals. This provides guidelines for ethically investing reserves in a prudent, profitable way.
Favor conservative fixed income assets like bonds that preserve principal over high risk equities. Seek steady modest growth rather than rapid gains - and avoid overly complex instruments like derivatives. Diversify across asset classes and rebalance periodically.
By taking proactive steps like these to diversity revenue, cut waste, collaborate, and invest wisely, churches can build financial resilience. With improved financial health, churches can focus on continuing their spiritual missions even in turbulent times. The strategies above can help shore up churches' coffers and free them from constant budget worries.
While finances should not dominate churches' attention, adequate funding is crucial for sustainable ministry. Building financial resilience now will allow churches to keep pursuing their callings for years to come. With God's help churches can flourish, but wise stewards must still diligently build up earthly reserves and manage church funds well. This honors the gospel call to steward resources wisely for God's glory.
