Putting the Fun in Fund Accounting, Part 1
Updated: Jan 16, 2020
Main Idea: Financial Reports
Most people break out into hives when they have to deal with numbers. Reading a financial statement, or even listening to someone talk about it at a church meeting, can cure insomnia in a large percentage of a congregation.
But it's essential to have an idea about your church finances. Breaking the topic down into smaller bits will avoid becoming overwhelmed.
Today I'm going to introduce you to your operating account, your two most significant expenses, and a little bit about fixed and variable costs.
Never fear. I'll use something outlandish that will make it easy to understand.
First, let's define what I mean by "operating." Your operating account and reports contain everything that goes into the operation of your business (your church, in this case). Your other accounts and reports might include various "designated" funds or endowments.
So we'll be talking about just those accounts and financial activities that run the church.
The highest cost of any organization is almost always payroll. The second largest is usually the building.
Now, let's pretend that you're spending a million dollars a year on your building. (I told you I was going to be outlandish!) This expense includes utilities, maintenance, supplies, and repairs.
Your elevator maintenance is a fixed cost. It doesn't change throughout the year. You can go up and down the elevator all day long, and the maintenance cost will never vary. But the repair cost is variable. You know it will be high, but you don't know how high.
Your payroll expenses can be fixed costs if your employees are salaried. Payroll costs are variable if you have part-time employees who only work when there is work to be done.
Clergy, for example, are usually a fixed cost. A cleaning crew, on the other hand, is needed more when there is more activity in the building, so they are a variable cost.
Now you can go back to your church financial statements and look at your building and your staff. Let me challenge you to look at each line and find out if it is fixed or variable.
Stay tuned for the next edition of Putting the Fun in Fund Accounting!
And let us know what you've learned in the comments below!