In Episode 4 of this season on ‘Making Things Happen: Churches, Charities and Money’, Simon and Bex discuss how charities and churches can best manage their budgets and cash flow.
Some key points of interest covered in this episode include the following:
- Simon starts off by explaining that managing budgets and cash flow well are vital factors to prioritise for anyone aiming to run a viable charity. [01:10]
- In response to a question from Bex, Simon notes that a charity must have its own dedicated bank account; in addition, each charity must also be managed and overseen by a board of trustees. [02:16]
- Simon goes on to explain that effective cash flow is a vital element of any charity: to fulfil its purpose, the charity will need to have money going out of its account as well as having money coming in. A sensible approach is to identify a manageable number of charitable objectives and to focus consistently on meeting those aims. [04:29]
- Bex asks Simon how a charity should aim to balance its financial commitments and charitable obligations with unpredictable income, as experienced by many charities. He comments that a sensible, business-inspired attitude can serve charities well in this context, especially in terms of adopting a flexible approach that includes prudent contingency plans for unexpected necessary expenditure. [06:54]
- Bex notes that the task of balancing expenditure to income can create an additional layer of complexity for faith-based charities because of their belief in the possibility of divine provision. Simon reflects on his own experiences as a trustee of endeavouring to achieve an appropriate balance between trusting in God for successful outcomes and managing a charity’s finances in a responsible and legally compliant manner. He suggests, also, that it should always be borne in mind that the money held by a charity exists not as a goal in its own right but in order to serve a defined purpose. [09:19]
- When it comes to the personnel dealing with a charity’s finances, Simon highlights the importance of ensuring – even in ‘a one person charity’ - that individuals in such roles are well equipped and supported to deal with all relevant tasks and responsibilities. [11:45]
- Effective communication and oversight are also very important to good financial management, especially in situations where there are several budget and sub-budget holders. [13:09]
- Major providers of support and training for those involved in managing a charity’s finances include organisational and local networks, as well as the charity, Stewardship. [14:12]
- Simon provides more detail about how a charity can prepare itself for unexpected financial challenges by planning wisely, anticipating specific scenarios and prioritising effective and targeted communication about best practice and contingency plans. [16:23]
- Another benefit of having good systems and communication in place is that they can enable charities to make sensible adjustments to budgets and financial priorities on an ongoing basis rather than having to wait for an annual review to make such changes. [20:02]
- Simon also draws attention to the need to make objective, evidence-based decisions on current performance and priorities rather than falling for the ‘sunk cost fallacy’ by continuing with tasks and projects simply because so much time and effort has been invested in them already. [22:47]
- Simon encourages churches and faith-based charities not just to rely on money to solve problems but to continually bring situations to God and to seek wisdom regarding how best to focus on creating benefits for people and communities. [25:15]
- Simon concludes by commenting that finances are ‘the beating heart’ of most charities, meaning that charities and churches need to make sure that they have at least one person with the appropriate financial skills in their set-up. [26:47]
- The next episode in this season will consider what kinds of conversations about money should take place within charities and churches: how, when and with whom? [27:44]
Suggestions or feedback arising from this episode can be sent via email to whereyourtreasureis@freerangepodcasting.co.uk while messages via Instagram should be directed to @whereyourtreasureispodcast.
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