Money Matters Q&A: Should We Start Digging Into Our Reserves?

Aug 24, 2020 | Finance

My church is fortunate enough to have a number of investments in reserve.  We really don’t want to deplete those investment, but our current cash flow is down because of the pandemic and we’re wondering if now would be the time to convert some of those investments into cast.  Should we start digging into our reserves?  Is this a good or bad idea?

Churches and other organizations with liquid assets will sometimes put additional assets into marketable securities holdings with the hope of generating investment income while they’re being held as reserves.  The assumption is that you would convert those investments to cash when they are needed.

So, yes, it is appropriate to prudently use cash reserves when unexpected developments cause cash flow shortages from regular operations.  That is the essential purpose of cash reserves.

Churches that begin to utilize their reserves – and deplete them going forward – must remember that the fundamentals regarding reserves don’t change.  And while we don’t know what the future is going to look like in terms of our financial operations, we still need to keep in mind that cash reserves have a place for unexpected developments that can still be coming.

Church Law & Tax, by Michael E. Batts, CPA

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