Published Jul 04, 2023
In my career, I’ve worked in several industries: insurance companies, agriculture, and for the past six and a half years, non profit. My primary goal as CFO has been to provide the information necessary for leadership to make good decisions. Across every industry, I’ve found a few key concepts that are at the heart of financial management. Here are three that I believe will make your financial management stronger than ever.
Keep It Simple
I’ve seen it time and again. Finance folks love to over analyze everything and create reports with every data point possible. There are a few major problems that can arise from that proclivity. First, if the financial report you are creating is too complicated, you will likely get stuck in the weeds of data and not see the big picture or overarching trends… in other words, analysis paralysis. Second, your probability for errors goes up with the complexity of the report. Third, such complicated reports are very difficult for non-finance folks to understand. Think of your end user. Is it your board? Your senior and executive pastor? Your congregation? If you’ve ever seen these folks’ eyes glaze over when you present a finance report, you know what I mean. When you put together a report, keep it simple! Your report doesn’t have to answer every conceivable question, instead it should be a summarized view that leads to meaningful discussion. You can always drill down into the data to answer more specific questions as they arise, and then bring the answers back to your end users. But err on the side of simplicity. It’ll go a long way in making your meetings and conversations more meaningful, and your reports more understandable.
Timely and Accurate Reporting
Another weakness of financial management is a lack of timely and accurate reporting. While frequency depends a great deal on the size, complexity, and even staffing levels of an organization, what is a must is the delivery of finance reports in a timely manner. Most organizations would do well to have monthly reporting; however, sometimes quarterly is all that can be managed. Either way, it should only take ideally two weeks (and at most four weeks) to produce the finance report from the previous period. It is critical that your report be produced consistently (every month, quarter, etc.,) and timely. If the report is too old, its utility greatly diminishes, because finding out six months later that you’ve been running a deficit is a bad day. Had you known sooner, you could have fixed the problem sooner and saved a lot of money. The same is true for inconsistent or missed reporting cycles. That is a quick way to miss critical information, and it can lead to expensive oversights.
Similar to timeliness, accuracy is paramount. What is most important is that transactions end up in the right account type and there aren’t any material errors. You don’t want to miss any meaningful transactions, but you’ll have to balance that with driving yourself crazy chasing pennies. The main thing is being sure that revenues end up in a reasonable revenue account and expenses the same. A common error is when transactions are erroneously recorded to a balance sheet account rather than an income statement (otherwise known as a profit and loss or statement of activities) account and then when you print the income statement it’s like that transaction never happened. Probably the biggest culprit of inaccurate reporting is when too much emphasis is placed on the bank account and not the financial reports. Often times, as long as the check was written, cleared the bank, and the bank account isn’t overdrawn, no one looks any further. The cash is just one side of the transaction; it is absolutely vital that the other side is accurate as well.
You Can’t Manage What You Don’t Measure
This last concept is one of my favorite finance mantras; you can’t manage what you don’t measure. In financial management, metrics are king. In ministry, I think far too often there is a mindset that removes finances from kingdom impact. I hear it in the way we talk when someone says, “If we spent a million dollars to save one soul, it would be worth it!” While certainly a soul is infinitely priceless, we as stewards of resources do not have infinite amounts of money. We need to flip that mindset on its head and think, “What would be the greatest kingdom impact possible with the finite amount of resources we have been entrusted with?” Some might call it a Kingdom Return on Investment. You likely have several ideas for reaching your community or the world for Jesus. As you implement these ideas, measure the financial cost versus the impact. That way, in the future, you can compare different events or strategies and see what was the best stewardship of your resources. Your measurements might range from salvations to baptisms, or maybe it’s meals served or individual conversations had. Whatever the outcome goal, measure it and keep track so you can better focus your ministry dollars in the future. By doing so, you might find a pattern that shows what your strengths and weaknesses are in ministry. Aside from direct ministry, the same applies to other areas as well. You won’t be able to effectively manage your travel budget or your supplies budget if those expenses are all lumped together and indistinguishable. Likewise, you won’t be able to hold anyone accountable if you aren’t tracking your expenses at a departmental or individual level. Measurement goes hand in hand with management.
A Final Word
My prayer is that our Money Matters emphasis in July gives you insight and wisdom from experts who eat, sleep, and breathe financial and risk management. These are such important topics for our churches and for our lives, and yet I find they are often overlooked in our world of ministry. I am excited for the resourcing that I believe you will be provided with from our panel of amazing ministry partners.