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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).
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!
In a previous blog post, I shared the different ways your church can thank donors—from automated emails to year-end giving reports. Printed donation letters also play an essential role in your church’s stewardship efforts.
Donation letters are the Swiss Army knife of your church’s gratitude arsenal. It may not be the most powerful—but it’s versatile, handy, and gets used often.
Your basic church donation letter can serve many different purposes, including:
A single, well-crafted donation letter can pull together several of these things simultaneously. Better donation letters lead to more giving, which leads to more donation letters—thus creating a cycle of on-going church generosity.
Here’s the good news—you don’t have to write an individualized letter for every person who gives to your church. That would be tough to do for even smaller churches. And most donors don’t expect you to. They’d rather you be putting their gift to better use in the community, instead of ceaselessly writing thank you notes.
With the possible exception of some unique circumstances, your church can use template language for the majority of your church donation letters. You’ll have to add in custom details like the donor’s name and gift amount, but you can write everything else in advance.
To make this even easier on you, here are a few basic church donation letter templates you can copy and paste. Keep in mind that not all of these have to be in print—you could just as easily turn some of these samples into email appeals.
The Donation Acknowledgement Letter is a basic way you can confirm and affirm a monetary gift to your church. Sending these is standard practice in church and nonprofit culture.
Dear [first name],
I want to personally thank you for your donation of [gift amount] to [church name]. We’re honored you would bless us with your generosity. Donations like yours make a big difference in the work our church is doing in the community.
Without givers like you, our church can’t have an impact or influence in our community. With your support, we’re partnering with local nonprofits, sending out global mission trips, and hosting small groups on topics that help real people like you. Together, we can make a difference.
Because we’re a tax-exempt nonprofit, you also get to write this donation off on your taxes. This letter serves as official proof of your donation, so keep it in your records come tax season. At the end of the year, we’ll also send you an annual recap with how much you’ve given to the church.
Thank you for supporting [church name]!
Not every church member realizes the importance of giving, or understand Bible verses about tithing and giving. So a Donation Request Letter helps to spread that awareness and encourage a spirit of generosity.
Dear [first name],
How are the finances in your household? That was a rhetorical question, so you don’t have to answer—besides, this is a letter so we wouldn’t hear you anyway. But we still want you to think about that question.
Money is a uniquely human issue, one we all struggle with to one degree or another. Even if you’re financially blessed, you still have the burden of stewarding your money wisely. And we believe that one of the best ways to invest your money is into the local church.
Tithing (giving 10% of your income) on a regular basis not only supports the work we do at [church name]. It doesn’t just support local missions and community growth. It also shows an obedience to God by making his work a financial priority in your life.
So if you find yourself ready to put God first in both your heart and your wallet, we encourage you to make a one-time gift or sign up to make recurring donations. That way, you won’t have to ever wonder again about the financial status of your household.
Many church donations aren’t just one-time gifts. Plenty of givers contribute monthly—and that should be acknowledged.
Use this template to correspond with recurring givers.
Dear [first name],
Thank you for being an active and faithful member of our church community. By giving to our church on a monthly basis, you’re showing that our church has a meaningful place in your heart. We just wanted to write this to let you know that you’re in our heart, too.
Donating to the church monthly allows us to preach the gospel, make disciples, and support others in our community who need help. Others like the local food bank and the nearby homeless shelter. We’re answering the cry of the needy, and it’s all thanks to contributors like you.
We earnestly appreciate your ongoing support and want to let you know we’re here for you. If there’s ever anything we can do for you and your family, don’t hesitate to reach out. You are a valued member of our church family. And you’re financial support is making a difference.
At the end of each year, it’s customary to give your church supporters a summary of their gifts. The primary reason is for tax purposes, but it’s also a way to recap everything your church has done over the past year with their support.
Dear [first name],
You’re getting this letter because you gave to [church name] at some point during the past year. That might have been a one-time gift, or recurring donations. Either way, we want to thank you for your generous support. Every contribution helps.
One of the official reasons for this letter is for tax purposes. That’s right—you get to write these donations off on your taxes. Which is why we’ve included a summary of all the contributions you’ve made to our church this year.
But the other reason for this letter is to let you know what we’ve done with the money you gave. We take stewardship very seriously, which means we value spending our time and resources wisely.
During the year, our church supported local nonprofits, sent global missions teams, and baptised quite a few people. It was a great year for us—thanks in large part to donors like you.
So thank you for your support of our church, and we hope you’ll consider continuing to contribute to our mission in the coming year.
Sometimes you need to make a more significant financial push using tried and true church fundraising ideas. Some churches call this a Stewardship Campaign or a Church Capital Campaign. Either way, the goal is to raise a certain amount of money for a big project. And typically, a solid letter of appeal is an integral part of that.
Dear [first name],
God has a plan for everyone and everything. That includes you, and it includes [church name]. None of us can fully know God’s plan—the best we can do is pray and listen for clarity. Our church leadership has been doing just that and are excited to announce our latest church project.
[Detail the outline of the major church project—this could include a building campaign, or raising support for a global mission trip. Anything specific to your church that requires a fundraising letter. Be sure to include a fundraising goal so everyone knows what you’re shooting for.]
But we can’t pull this off without your support. Whether you give to the church on a regular basis, or just attend on occasion, we’re asking you to consider contributing to this massive undertaking prayerfully. It’s something we need our entire church community’s help with.
Even if you can’t make a large gift, know that every little bit helps. It’s more about coming together as a community united behind a common cause. We hope that you’ll consider making a donation towards this great step forward that we’re making together.
It’s not enough to just copy and paste this content and send away. The key to an effective church donation letter is a touch of personalization. Follow these tips to take your donation letters to the next level:
There’s no one right or wrong way to write a donation letter or request contributions. You’ve got to do what is right for your church and congregation. But if you stick to these general tips, you’ll probably start to see some traction when it comes to giving.
Most people don’t love talking about money in church. But it’s a necessary and vital part of your church. And maximizing your efforts when it comes to donation letters will help make those conversations more comfortable. So what do you do next to put this into effect?
And if you’re looking for ways to grow your church’s giving capacity, Tithely can help.
Tithely’s systems make it as easy as possible for people to give to your church. Now all you need to start doing is generating a culture of gratitude. There’s nothing standing in your way. Go unleash generosity in your church.
How does your church use donation letters to spread generosity? Share your thoughts in the comments below!
Editor's Note: This is a guest post from Robert Carnes. Robert is a writer and storyteller. He's the author of The Original Storyteller: Become a Better Storyteller in 30 Days. A former church communicator and nonprofit marketer, Robert works as a managing editor for Orange in Atlanta.