FINANCIAL PLANS #2

 

            Last week, I talked about personal financial plans and introduced the idea of church financial plans.

            For a personal financial plan, it should:

• ·         Prioritize savings for the future
• ·         Focus on reducing existing debt
• ·         Divide the rest of your income into your expense categories, like housing, food, clothing, transportation.
• ·         Do all of this, keeping God in mind.

            The keeping God in mind concept is good, reducing debt is good, prioritizing savings is also good; but I think there’s a different way to approach a church’s financial plan. Church Law & Tax did a study about how churches spend their money. How does this compare to your church?

            Start with the amount of income you “know” you’re going to receive during the upcoming year. You will, of course, have to make some assumptions: pledges and “known” unpledged giving, rental income, interest income, etc., may vary in reality, but you probably have a pretty good idea and you have to start somewhere. Once you’ve done this, start a list. Start with the amount of income at the top.

            Then, create a list of the “fixed” expenses. You know which ones I mean, the ones you have to pay, no matter way—utilities, mortgages, real estate taxes, retirement and health insurance. Subtract the sub-total of that from your income number. Write that number down.

            Then create a second list of the “semi-variable” expenses. These are expenses that may seem fixed, but can be changed. That may be ministry shares (although these should be fixed). It may be payroll. Please keep in mind that paying employees is a fixed cost, but changing who is employed and for what positions can be changed. It may not happen today or tomorrow, or even a month or two from now, but in about 12 months or so, those amounts might be changed. Then subtract that sub-total from your remaining income number. Write that number down.

            The expenses that are left are “variable” and don’t have to be paid. These are most likely your mission and ministry amounts.

            That all sounds good, but I want to point out where this will point out issues that you need to look at when making your financial plan.

            If there is no income left after the fixed or even the semi-variable expenses, there is an immediate need to work on a plan. The way you’re set up prevents you from doing any ministry that you are called to do.

            Reducing employees, including clergy, might be a short-term solution, but unless a plan is put in place to “right the ship”, this may start a repeating cycle.

            Mission and ministry, for accounting purposes, may be variable costs, but mission and ministry is what we are called, as churches, to do and be. If we’re not able to do that, but are only paying to keep doors open and lights on—what does that say to us as a church?

            This is all an accounting procedure, but it should be able to help you figure out what your financial reality says about your future as a church!

           

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Please feel free to contact me at (315) 427-3668 or susanranous@unyumc.org if you’d like help with your church’s financial reality and planning for the future.

 

                                                FINANCIAL PLANS #1

 

            Are you like me? Do you like lists? I like to joke that sometimes I have a list of lists. When I was getting ready to go to college, I prepared a list of the various lists that I would need to create to be ready…list of books, of clothes, of groceries, of items for the room, etc. etc. Each week, when I get in the office, I sit down with my calendar and with my list from the prior week and create a list for the upcoming week… of appointments, of tasks, etc. Some of the tasks are “repeaters”, but some are new. As new work comes it, I add it to the current week’s list. Each item gets crossed out as it gets done. For me, that plan works; it forces me to go through, in my mind, everything I have to consider for the upcoming week and allows me to plan what time I have available and how to do what I need to do in the time I have.

            Of course, not everyone is a list person. But all of us should do planning of some kind for various reasons. One of the plans we should put in place are financial plans. You’ve probably heard some of the statistics: most Americans live paycheck to paycheck and many have no savings.

            For the same reason that I create a list: I can’t keep everything memorized in my head; we have to have a written plan, because we can’t keep our financial lives in our head either!

            For a personal financial plan, it should:

• ·         Prioritize savings for the future
• ·         Focus on reducing existing debt
• ·         Divide the rest of your income into your expense categories, like housing, food, clothing, transportation.

·         Do all of this, keeping God in mind.

            This same idea could help your church too! Churches should have financial plans as well. Many churches, both pre-COVID and post-COVID are in the mindset that they have financial problems. I still hold the firm belief that no church has financial problems; the money issues that they have are symptoms of the real problems. A financial plan would help you and the church leadership focus on what those real problems are. Next week, I will talk about how to start financial planning for the church.

 

Please feel free to contact me at (315) 427-3668 or susanranous@unyumc.org if you’d like help with financial planning.

 

                                         YEAR END - IN JANUARY

            Last week, I wrote about clergy taxes and steps that clergy should make to make themselves ready for their tax returns, and to prepare their “tax lives” for the current year that we’re in, before we get too far in.

            This week I want to write about what churches/finance folks/pastors need to do and plan for—let’s call it a “to do list”. We are mid-way through January, and while it seems we can let out a sign of relief because Advent and Christmas are in the rearview mirror, we can’t. There’s still a lot to do (or get ready to do).

• ·         W-2 Forms - If your church has employees, including your pastor, then you have to prepare W-2 payroll forms. These are the forms that report to your employees what you paid them, and taxes and other items withheld. They have to be sent to the employee no later than January 31^st, and filed with the government by that same day. You may also need to prepare a file quarterly federal and state payroll reports (Forms 941 and NYS-45)—also due by January 31^st.

• ·         Giving Statements – The Internal Revenue Service requires that we send a giving statement to every identified giver that has given during the year. It reports to the giver what they have given during the year. It also requires a statement that no goods or services were provided in exchange for the amount, other than religious benefits. These also much be done by January 31^st.

• ·         The statistical report system has opened. In case you hadn’t heard, the statistical reports are no longer done through EZRA but through ACStats. These must be completed online no later than March 15^th. There are sections on members and demographics, and there are also financial sections. For some, this is an overwhelming process, but if you approach them step-by-step, it isn’t so bad.

• ·         The annual church audit, which is require by the Book of Discipline, has a due date of March 15^th. This is the responsibility of the Finance Committee to provide for. Pulling together the necessary information and making the arrangements sooner rather than later will help get it done in a timely fashion.

• ·         There are also a couple more reports that are due (post Charge Conference)

o   Report of Trustees

o   Report of Finance Committee

o   2022 Year End Financial Report (your format)

o   2023 Church Budget (your format)

            Please realize that this “paperwork” isn’t busy work; some are governmental requirements; some are Conference or Denominational requirements, but ALL are necessary. The reports and information help you, as the local church; your district, your conference and the denomination make decisions.

           

Please feel free to contact me at (315) 427-3668 or susanranous@unyumc.org if you’d like help with completing your forms or getting answers to your questions about them!

 

 

                                                        CLERGY TAX

            We are at the beginning of a new year. Of course, in the church world, the appointment year started July 1^st. The church year started at the beginning of Advent, but the rest of the “world” looks at January as the beginning of a new year.

            In the “world of taxes”, look at December 31^st as the end of the year, and realize that what has happened before is going to affect what goes on in the new year. Taxes, tax forms, etc. all come into play.

            Now that the 2022 year has finished, you will be receiving a W-2 form, reporting your taxable wages, any housing allowances and exclusions, and any federal or state income taxes that you had withheld. What has been and has been reported will be used to prepare your income tax returns. There’s really no chance to make any changes that will help you at this point.

            However, now is the time to work your tax professional to do a projection for 2023, and see what you can do to minimize any payments you have to make.

• ·         Should you have federal and state income taxes withheld from your paychecks?
• ·         Should you pay quarterly estimated taxes?
• ·         Have you claimed enough as housing allowance/housing exclusions?
• ·         What is the amount of self-employment tax you’ll have to pay, and how can you spread out the payment of those taxes?
• ·         Are you tracking your business expenses, submitting them to the church for reimbursement, and providing unreimbursed amounts to your tax preparer?
• ·         Are you tracking your “business” mileage?

            All of these questions are important to consider and answer and work on now while you can make changes and decisions that will help you for 2023!

 

           

Please feel free to contact me at (315) 427-3668 or susanranous@unyumc.org if you’d like help with projecting tax consequences based on your income, deductions, etc.!