I love electronic gadgets. What a treat it was this year for me to receive a watch that tracks everything this Christmas. This watch does so much more than tell the time: it monitors my steps, my sleep, my oxygen levels, my heart rate, my location, and even my other devices. It gives me insight into areas of my life that I had no idea were neglected or overused. One of the features that I find myself constantly checking is my heart rate. For some reason, I am fascinated by seeing the difference between my current heart rate, resting heart rate, activity heart rate, and recovery heart rate. Maybe it is because my pulse is a good indicator of my health. Running monthly financial reports serves the same purpose. A financial report tracks the progress of the income and spending and then compares them to the budget. A Statement of Financial Activities, or SOA report, generated monthly, is the best way to check the financial pulse of the church. Here are a few health indicators to look for in this report.
The amount of money that comes into the church is known as income. For churches, a large majority of the revenue is through the generous donations of those attending. Be sure to include other streams such as bookstore and coffee shop revenue, rental fees, and other types of income as well. Many churches do not include these auxiliary forms of income in their general operating budget. That’s why it is best to show them separately on the SOA. Here’s an example of what it could look like if a church budgeted for offering and coffee shop, but not rentals:
|Month||Actual||Budget||Diff||% of budget|
While tracking expenses is more detailed, it uses the same basic principles as the income portion of the SOA. When crafting the budget, it takes time, effort, and strategy when developing the Chart of Accounts, or COA. The COA is the list that represents all of the financial transactions of your church during a specific period, broken down into sub-categories. For example, compensation should have several sub-categories like salaries, taxes, benefits, and retirement. It is important to remember that the expenses on an SOA report will not show non-expense transactions, such as mortgage principal, since this is a reduction to the mortgage liability even the money went out during the mortgage payment. Try not to get too caught up in weeds on this; the point is to get a pulse of the finances. Here’s an example of the expense portion of the SOA:
|Month||Actual||Budget||Diff||% of Budget-|
|-Repair & Maintenance||$1,500||$1,200||$300||125%|
Every month list all of the income and create a sub-total. Then list all expenses and non-expense costs for the month. Subtract the expenses (and non-expenses) from the income to determine if the church is on track with the budget. It is important to remember not to live and die based on a single month’s report. Church donations rise and fall throughout a year, as do expenses. For example, if the high school ministry budgeted for two youth camps for the year, that expense category may look under budget or over budget depending upon when they go to camp.
In the same way that my new smartwatch tracks my vital statistics, running an SOA report every month will provide your church with critical information to ensure its finances remain healthy.