While they may have big differences in mission, churches and businesses have much in common. They have salaries to pay and operations to manage. They also need cash reserves on hand to cover any unforeseen expenses and to meet their budgetary needs throughout the year. These cash reserves serve as a hedge against the unpredictability of donations and tithing.
And, while it’s important to have those funds on hand, it’s equally important to keep them working. You need a plan for your cash reserves because idle funds could be costing your church real money over time.
Here are a few things to note about how unused funds can cost your church money and how you can be sure your financial reserves are safe and doing the most good for your ministry.
What are idle funds, and how do they affect religious organizations?
The term “idle funds” can be described as money that is not invested and therefore does not earn interest or investment income. If you have a reasonable budget and sound financial management, you’re already protecting your ministry. But if you overlook excess funds that remain in reserve, you aren’t providing your church with the maximum return.
Besides average annual contributions, your church might have funds from endowments or donations for long-term capital projects. These funds can also provide a return over time. By missing the opportunity to put them to work, you’re putting that money at a higher risk of fraud or theft. You’re also missing out on potential interest-related gains or watching your funds depreciate due to inflation. And, did you know that depreciation is the largest non-cash annual expense for churches?
How can religious organizations protect their funds from theft and fraud?
Since churches tend to operate on a system of good faith, they need to make financial management and accountability a priority, or risk allowing those with bad intentions to exploit holes in the organization.
This is where solid systems and processes can have a profound impact. Vendor payments can be managed through a third party, which reduces the number of touchpoints, streamlines disbursements to vendors and provides transparent reporting to ensure your money goes where it’s supposed to go.
In addition, deposit management services protect your cash reserves, spreading them around to various financial institutions to ensure every last dollar is fortified by FDIC / NCUA insurance — the ultimate financial safeguard. Your congregation can rest easy knowing that you are managing their donations wisely.
How can religious organizations earn more from their deposits?
The safety of your religious funds is paramount, but you’ve also got to make the most out of every dollar you bring in. That’s another area in which deposit management can be a tremendous asset to your organization.
Through the process of spreading your cash reserves to different financial institutions using fintech, deposit management services allow your funds to earn nationally competitive returns. Your pool of donations stays liquid and secure while it grows. And, the more you can maximize your congregants’ generous donations, the more your institution will thrive.