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Does managing your church's finances make you feel like pressing the panic button? Hang tight. These six must-know tips will help you get control of things.
March 9, 2018
Love it or hate it, your church must manage money.
If your church has a more extensive staff, then managing church finances may not be a big problem. You most likely have the bandwidth to delegate this work to a trained staff member or outsource your needs to an accountant.
For many smaller churches, managing your church’s money can be a little trickier.
You might not know a lot about church finances best practices. You may have a volunteer, a reluctant member of your staff who does this part-time, or even the pastor or the pastor’s wife overseeing your church’s finances. Easier said than done, right?
Keeping track of donations and expenses, following church financial management best practices, and even knowing where to start or where you’re going as a church is challenging if you don’t have adequate time or the right training. Before you grab a paper bag or press the panic button, hang tight. We’ve got you covered. This article will cover how to effectively manage church finances.
In this post, we’re going to walk you through tips you must-know for managing your church’s finances, including:
So sit back, buckle up, and soak up these tips.
The best way you can steward your church’s financial resources is to create (and follow) a budget.
Depending on the size of your church and your total annual donations, you may not have a dedicated staff member who is managing church finances, and you may feel overwhelmed by the thought of cracking open your church’s checkbook. If this is you, don’t worry about becoming financially savvy.
Unless you were trained as an accountant or have experience with managing budgets, as a pastor or volunteer, you don't need to worry about becoming a certified public accountant (CPA). Your goal is to know the basics of budgeting, which are reasonably simple and never changing.
To help you think through your church’s budget, assess the current state of your finances by reviewing the last 1-3 years of your financial statements.
During your review, you also want to take a look at the trends in your church’s attendance and giving. Keep an eye on whether or not your church is experiencing a gradual or sharp increase or decline in giving. It’s a good idea to know where you’re at before you move ahead with significant financial decisions.
For your budget, there are three crucial benchmarks your church need needs to measure. Knowing how your church’s budget compares with other churches will help you to understand how efficient your church is operating.
According to AG Financial Solutions, here are the three crucial benchmarks for church budgets:
Within these categories, you will have many different line items. But overall, these are good numbers for your church to aim for in your budget.
Also, if you follow these guidelines, then this will leave your church with plenty of wiggle room for giving toward ministry and saving.
If you’re new new setting a church budget or just need some help seeing how other churches budget, here are some resources you can review:
Do you have a clear understanding of your church’s finances?
Well, let me ask you, do you nervously sweat at the end of the month? Or, does the end of your church’s financial fiscal year make your heart skip a beat?
If you answered anything other than “no" to these two questions, then you don’t have a clear understanding of your church’s financial situation, or you know too much, and it makes you nervous.
Church finances best practices require that, you, your staff, or a volunteer will need to keep track of how many donations your church receives (revenue) and how much money your church spends (expenses).
Insert shameless plug: With Tithe.ly online giving, the process of tracking your donations is pain-free. The reporting tool makes it easy for you and your staff to see every gift you receive and it provides you with weekly and monthly summary reporting, including a host of other church giving features.
Another significant trend to track in your church is how much the average member donates. The easiest way you can measure your average member contributions is to divide your total donations by the number of giving units in your church, which sounds so robotic to say.
A giving unit is an individual, couple or family who gives to your church. It doesn’t matter how your church defines a giving unit. The main thing is that you pick a definition and consistently apply it in your financial analysis.
To help make this more practical, if your church received $120,000 in donations in 2017, and you have 100 giving units (who are members of your church), then your average giving per unit is $1,200 per year.
So, this means if your church’s membership increases by 10, then you can consider forecasting an additional $12,000 in your budget. Or, if your membership decreases by 10, then you will need to reduce your budget by $12,000.
What if you could know how much someone was going to give to your church every month? This would make your budgeting process and church financial planning significantly easier, right? We think so.
Leading your church to automate their giving will help your church budget—and it will help you to build a more generous church culture.
Basically, if you have more people who give to your church on an automatic, recurring basis, the better you can budget for current and future expenses. Think about it this way.
Picking up our example from above, say the average giving unit in your church donates $100 per month. Now, let’s say this person or family gets sick, forgets their checkbook, or goes on vacation and misses the opportunity to give three times during the year. If you’re following along with the math, that means their annual giving has dipped to $900.
A loss of $300 per year isn’t too big of a deal if we’re only talking about one giving unit. However, if you multiply this by 100 (from our example above), then your church’s budget has a deficit of $30,000, which is 25% of your total donations. If you can’t say “amen,” say “ouch.” This also makes church financial planning more difficult as you can't predictably plan and set your budget for the year.
To help you avoid this scenario or other common slumps in summer and holiday giving, and to better serve your members who desire to give a certain amount, lead givers to set up recurring giving. Doing this will help your givers fulfill their desires and it will help your church to know what to expect each month with giving.
Great question and I’m glad you asked.
In general, people who sign up for recurring giving donate more frequently and donate more per year. For your church, automated giving creates a steady and predictable source of donations. What is more, date from Network for Good shows that donors who set up recurring contributions give 42% more annually versus those who make one-time donations.
If you’re still not convinced about the benefits of recurring giving, here are six reasons why you should consider providing automated giving:
The easiest way for you to lead your church to automate their giving is to encourage members who regularly give a check to automate their giving. With Tithe.ly, your members can create an account and set up recurring giving with a few clicks.
Here’s the unfortunate reality we live in: Stealing is a problem inside and outside of the church. As a church, your leadership is called to stay above reproach (1 Tim. 3:2; Titus 1:6-7). So, it’s essential for your church to have a variety of safeguards in place to protect the integrity of your church and leadership.
Here are a few things for you to consider:
For additional financial security, Aubrey Malphurs and Steve Stroope recommend removing your church’s senior leadership from being directly involved with the church’s finances. This idea may not be possible for your church. But if you can make this move, it will provide you with an added level of financial integrity, and this arrangement will also give your members peace of mind knowing that your pastor and staff are not involved in their life based on whether or not they donate to your church.
It’s a good idea for your church to have a financial cushion. As you know, your church will have unexpected expenses or your church may experience an extended decrease in giving.
Even though there are arguments for and against a church having financial reserves, it’s a good idea for your church to build a reserve of cash for emergencies.
Based on a survey conducted by Christianity Today’s Church Law & Tax Group, the average church set aside 2% of their annual toward building their cash reserves, which is another good benchmark for you to keep in mind.
As you build your cash reserves, aim to save enough for your church to cover 3-6 months of expenses.
As a church leader, you have to walk a fine line when it comes to talking about money—you can talk too much or too little about your church’s finances.
In your church, there are two groups of people you need to keep in mind when sharing financial information: your congregation and your leadership.
Regarding to your congregation, it’s hard to say how much is too much or too little to share. For some churches, they have a history of sharing weekly updates, whereas other churches may share a financial update once per month, quarter, or year. So, how often you choose to update your church is up to you. Just aim to be consistent with your frequency.
Now, if your church has a financial emergency, then it may be a good idea to inform your congregation. Before you spill the beans, consider talking through the situation and what you’re going to say with your church's leadership first. Talking with your leadership early will give them the information they need, and ensure that everyone is on the same page.
For regularly sharing financial information with your leadership, consider including a financial update in your regular business meetings. You don’t need to go through every line item in your budget necessarily. But you should consider discussing the three crucial benchmarks listed above and your church’s trends in giving and attendance.
That wasn’t so bad, was it?
Yes, managing your church’s finances can be stressful. But following these seven must-know tips will help you to navigate your way through all of the numbers.
As a recap, here are the tips for managing your church’s finances we recommend:
What tips would you add to this list? Is there something, in particular, you find helpful? Let’s chat in the comments below!