In the last issue of Treasurer’s Corner, we discussed “Budgets: To Cut or Not to Cut?” where I highlighted some common red flags to identify whether your budget is in peril. If there are red flags flying high all over the budget statements, then it is time to consider the next question: “Should we consider implementing cost-saving projects?”
The answer to this question will help firstly, to create an action plan to reduce operational costs over time and secondly, to rebuild a healthy and sustainable budget.
So let’s have a look at what these cost-saving projects are, and why they are so important to consider. We’ll use ourselves as an example, reviewing the cost-saving measures CBWC management team has taken over the past seven years.
Case Study: CBWC Cost-Saving Projects
Background: The CBWC yearly budget used to be $3 million. Since 2012, the erosion of the three main revenue streams brought the yearly budget down to just $2.3 million; a loss of $700,000 a year. Needless to say, red flags were raised all over the budgeting process. We had to adjust to a new reality of working with a lower revenue.
We asked ourselves, can it be sustainable over time and what can be done to ensure that the ministries of the CBWC will be continuously funded, even if it means reducing or cutting funding to all ministries at some point in time?
Cost-Saving Project Scoping Work: We analyzed historical data such as yearly church contributions and dividends drawn from investments. The CBWC management team began to seriously consider implementing cost saving projects. Detailed financial analysis revealed that:
- Church contributions had flat lined over the last 22 years, not keeping up the cost of inflation. This reduced CBWC’s purchasing power by $659,397 over the same period.
- During the last 7 years, stock markets have been volatile, resulting in lower dividends from the development fund. This cost CBWC’s budget to drop roughly $300,000 every year.
- New fundraising efforts were introduced in 2015, and while we expect pay-off in the long run, cost money up front. They did not immediately cover the short term objective of buffering the revenue shortfall. This long term planning amounted to $100,000 a year that needed to be added to the budget.
With this situation facing the management team, we made conscious decisions to implement cost-saving projects to make sure CBWC remains solvent and able to fund the ministries of the CBWC year after year. The main objective was to maintain the current operational structure of the organization with $700,000 less revenue. The second goal was to maintain a balanced budget while keeping all ministries funded sufficiently throughout the year, despite lower revenue.
Results: As a result of good diligence and commitment practiced by the CBWC management team, we’ve implemented 48 cost-saving projects since 2012, which brought in a total of $529,086 in cost savings as of December 31, 2018. This endeavor has not stopped, and will continue year after year. Our goal for 2019 is to save $50,000 through cost-saving projects. So far, the latest project—consolidating our Mail Chimp mailing lists—will yield us $300 in savings this year. It’s a small amount, but not too small for the Lord’s work through reinvesting of this money into His ministries.
Another wonderful end result was that the CBWC’s budget for the last three years has closed out with a surplus every year. We could still achieve a surplus despite implementing cost-cutting measures and yet still have enough to fund all the ministry needs of the CBWC.
We praise God for his wonderful providence! We recommend that you should consider looking into cost-saving projects.
– Victor Ku
Questions & Answers
Q: What are some examples of cost saving projects CBWC explored?
- Participated in the NEET program for Alberta (Non-Profit Energy Efficiency Transition Program) for the Calgary head office
- Amalgamating staff mobile phones into one shared plan
- Digitizing the office filing system, improving work efficiencies, reducing filing work and saving office space
- Revised purchasing policy to include requirements of obtaining three quotations from three different vendors for major purchase evaluations, thus procuring the best options at the best price offered
- Practice lean management to reduce requirements for office space, enabling us to downsize the office without compromising staff work performance, efficiency and satisfaction
- Resource new data management system to bring savings from software licensing cost and at the same time improve data base storage efficiency from server based to cloud based with increased reliability security measures
- Reducing printing cost in the office and for all communication needs through using digital formats instead, thus saving paper and recycling cost
- Reallocation of staff responsibilities based on skill sets and through the use of advanced office technology to enhance staff productivity and efficiency
- Revisit yearly reoccurring events and planning cost for conferences. Scaling down expectations and yet maintaining the key objects and deliverables of the yearly conferences
- Review and renegotiate contracts with service providers for IT, liability and fire insurance coverage, stationery supplies, office cleaning, archives storage, banking services, telephone services, photocopier, accounting system software, social media and printing needs
Q: What tools are required to help with identifying cost saving projects?
A: Assemble a team. Look for people with experience implementing cost-saving measures, perhaps people with lean management experience or formal training in Six Sigma or lean management principles. Ideally some of these experienced people will be willing to volunteer as consultants to help come up with strategies, actions and plans to implement cost saving projects and lean management at the church.
Also look for those with strong analytical skills who can dive into historical financial data, interpret trends in tithes and expenses, and suggest possible practical solutions.
If you don’t have people of this caliber, don’t worry about it too much, as any willing person can be trained on the basic skills needed to implement cost-saving projects. The basic requirements are dedication, diligence, commitment and common sense.
Q: Is there specific training required of the persons to be involved in cost saving projects?
A: There are areas of training that can be procured commercially or just by reading some good books on Lean Six Sigma and Lean Management ideas. Training on Lean Six Sigma applications and Lean Management practices are widely available through most business courses focused on process improvements, available through commercial training schools. If you are interested to learn further, please kindly contact me for the information.
Q: What are the biblical world views on stewardship endeavors such as cost cutting measures, a part of best practices in the church?
A: Here are some suggestions on scriptural verses to consider when it comes to being good stewards of the Lord’s resources, which is what cost saving is all about. Remember that good stewardship means managing well the God given resources!
- Ecclesiastes 7:12 Wisdom is a shelter as money is a shelter, but the advantage of knowledge is this: Wisdom preserves those who have it.
- Matthew 25:14-30 The parable of the talents
- 1 Chronicles 29:12 Wealth and honor come from you; you are the ruler of all things. In your hands are strength and power to exalt and give strength to all.
- Proverbs 13:22 A good person leaves an inheritance for their children’s children, but a sinner’s wealth is stored up for the righteous.
- Proverbs 13:11 Dishonest money dwindles away, but whoever gathers money little by little makes it grow.
- Proverbs 16:16 How much better to get wisdom than gold, to get insight rather than silver!
- Colossians 3:23-24 Whatever you do, work at it with all your heart, as working for the Lord, not for human masters, since you know that you will receive an inheritance from the Lord as a reward. It is the Lord Christ you are serving.
March 2019 issue of Treasurer’s Corner | Subscribe here