Featured Columns

Written by Dan Busby
From his column God, Government and Me—Money in the Church


It’s the million-dollar question: “How much cash reserves should a church have?”

Adequate cash reserves are necessary for a church to pay obligations on time. Monthly revenues fluctuate, so cash reserves are necessary to provide a financial backstop. Reserves are the key to avoiding problems—like defaulting on mortgage payments.

Creating and maintaining cash reserves is not as easy as it seems. It requires thoughtful planning and faithful administration. There may be pressure to pay down debt early, increase the compensation of staff, or begin a new program—but these pressures do not discount the importance of creating and maintaining cash reserves.

The manner in which a church balances its cash liquidity opportunities speaks volumes about how that church demonstrates financial stewardship. So, let’s look at different philosophies on cash reserves.

The manner in which a church balances its cash liquidity opportunities speaks volumes about how that church demonstrates financial stewardship.

1. Low Cash Reserves

Some churches operate with few reserves, depending on the weekly cash flow of offerings and other revenue to cover expenses. While this approach demonstrates high faith in God’s provision, it also runs the risk of unexpected variances in cash flow which may result in shortfalls.

2. Adequate Cash Reserves

Some churches have a few months of reserves on hand—perhaps for capital replacement and mortgage payments. These churches are reasonably protected from unanticipated spikes in expenses and dips in revenue.

3. Excessive Cash Reserves

In a few instances, churches pile reserves upon reserves, building balances that, at least in part, may have been provided by God to expand His work.


Let me share five essentials of church cash reserves:

1. Make a plan to generate cash reserves.

Staying within the cash budget is certainly preferable to operating outside of it; but if cash inflows consistently equal cash outflows, cash reserves are not being depleted, nor are they being built. Here are a few concepts churches use to build cash reserves:

  • Project next year’s revenue to be lower than current year expenses.
  • Include a cash reserve line in the budget.
  • Add legacy gifts to cash reserves.

The bottom line: The only way to create cash reserves is when cash inflows exceed cash outflows. This is the “law of cash reserves.”

2. Measure Cash Reserves.

Cash reserves are often measured in terms of months of operating cash. In other words, if the operating budget (exclusive of cash related to unexpended designated or restricted gift balances) of a church is $1.2 million, one month’s operating budget is $100,000.

When using the number of months of operating cash to determine the adequacy of cash reserves, the most appropriate time to measure them is at the end of the month when cash is generally at its lowest point for the year, perhaps August 31.

3. Account for Designated Gifts.

The first priority for the use of cash reserves is to be sure they are at least equal to unspent designated or restricted gifts. A designated or restricted gift is one that is given for a purpose more specific than the broad limits imposed by the church’s purpose and nature. These could include a building project or mission trip.

4. Adopt a Cash Reserves Policy.

A church should consider developing a cash reserves policy to ensure appropriate reserves are available for:

  1. Unexpended balances of designated or restricted gifts
  2. Debt service
  3. Capital replacements
  4. Church planting and other ministries
  5. Operating reserves

5. Communicate the Importance of Cash Reserves to the Congregation.

Building cash reserves in a communication vacuum can create questions, or worse—prompt misunderstandings about why the church is maintaining funds instead of spending them. Sharing information about cash reserves is often done periodically, such as at an annual meeting.

When a church clearly communicates the reasons for why cash balances are needed, most givers understand. They recognize that having adequate cash reserves does not exhibit a lack of faith, but rather reflects attentiveness to good stewardship. As it says in Proverbs 21:5, “The plans of the diligent lead to profit as surely as haste leads to poverty.”

Various biblical texts illustrate that while God’s provision can at times be bountiful, it can also fluctuate greatly during any given year. Diligent administrators will exercise care to create adequate reserves to make it through seasons of famine as well as plenty.


by Dan Busby

If a program has run its course, how can a church take advantage of this from a budgetary standpoint?

Adhere to the old adage, “When your horse is dead, dismount.” When a church discontinues a program which has a significant budget, there will be a temptation to simply reallocate the funds to another one. However, when a program is eliminated, leaders should consider an alternative. Perhaps, the money that was being expended could be saved and used to shore up cash reserves.

What is the value of including a “cash reserves” line in our budget?

Some churches budget revenue conservatively and include a line item for “Additions to Cash Reserves.” When revenue and expenses equal the budget, the automatic excess of revenue over expenses not used for capital items goes directly to cash reserves.

Dan Busby is a certified public accountant and president of the Evangelical Council for Financial Accountability (ECFA).

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