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Church Finances 101: How to get started

08/27/2019 | By: Brink's Money

There are roughly 350,000 religious or faith-based congregations in the US. For the leaders of those churches, mosques, and synagogues it is important to lay a strong financial foundation that can set their organizations up for success.

In this article, we’ll provide a basic guide for church leaders to embrace the financial aspect of their role.

How to set a church budget

Preparing your organization’s annual budget does not have to be daunting or frustrating. You can instead look at it as a great opportunity to reflect on your mission and align your strategy for next year’s goals.

Your church’s budget should mirror your overall strategy, showing what you’re trying to achieve and what’s important to your congregation. To set up a healthy budget for your congregation, you should ask yourself a few questions:

  • What are your church’s priorities and are they reflected on your budget?

  • What is your spending plan? How can you allocate resources to accomplish your mission?

  • What is your current balance and your expected income from giving and other sources?

Once it’s time to set your budget, you must start with the baseline of what you spent last year and your current balance available. You hopefully have some record of previous years’ expenses. At a minimum, you should have financial records and receipts or even a physical ledger. If you haven’t already, you should prioritize the digitization of all your financial information, so it can be easily accessed in Excel or a digital accounting software.

 

Determine your annual goals

Before you allocate a single dollar or respond to anyone’s budget requests, you should decide on and communicate clear goals for the year. Since your budget is a clear indication of your priorities and mission, this step is key.

Your congregation can be a great source of feedback during goal setting. Ask them what’s important to them and how they’d they like to see the church contribute to the community. They might want to bring new members into the church or expand worship areas for your ever-growing parish. Maybe they will suggest adding new ministries, bolstering outreach missions, or creating educational resources for your members. Tapping into your flock’s collective ideas can help you define your goals, and each of their objectives comes with distinct budgetary requirements.

 

Get your expenses in line

Every church has to keep the lights on and pay its core staff. These categories, in order, make up an average congregation’s expenses:

  1. Employee salaries and wages

  2. Facilities, utilities, maintenance, and insurance

  3. Ministries and support programs

  4. Missions

  5. Administration, like supplies and travel

  6. Everything else

Collect, categorize, and analyze your church’s expenses from the previous year and ask yourself a few questions:

  • How are they distributed? Can you negotiate better deals on maintenance or insurance? Are there bad apples increasing personnel expenses?

  • Do you plan to spend more in certain categories? Less? Perhaps you need to pay for new transportation to support your programming, which is a large administrative cost. Or maybe participation in some programs is minimal and you can reduce expenses by trimming the fat.

  • Is your influx of money growing or shrinking? What would you do with additional funds? What would you need to cut if budgets were tighter?

 

Create a financial cushion

Every church needs some protection against the unexpected. Your budget should allow for some contribution to a rainy day fund throughout the year. Financial reserves take time to strengthen, but your reserves keep your budgets safe and let you invest in future projects. At the very least, your reserves should be enough to cover staff pay and to keep building utilities running for one month. That said, it is common for churches to save up at least six months’ worth of expenses as a reserve fund.

 

How to manage donations and tithes

Churches have to manage member contributions to remain open, pay employees, run religious school programs and plan charitable events. There’s no way around it: to maintain and grow your church you’ll need effective financial management skills.

To help create steady and growing contributions, consider the following:
 

Remain open to your members

The better the job you do at communicating, the greater results you’ll see. Your parish won’t know the church’s needs unless you tell them. This is especially true of new members—if your attendance is growing but your tithes are not, it’s probably because new parishioners aren’t aware of the need yet.

Remind everyone that the church only thrives with their support. Invite them to meet and discuss your plans. Your most dedicated members will be happy to help and can become some of your best fundraisers.

 

Be a good steward yourself

Keeping your churches’ financial metrics organized can also go a long way. Use reporting to your advantage to rightfully show your members where their contributions are going.

Tell them what you’ve been able to achieve thanks to their generosity. Show them where their money goes, be it new building projects or support for causes within the broader community. Clarity and visibility act as assurances that their gifts are being put towards the church’s overall mission.

It is not enough to consistently promote good stewardship without setting the example from the organization itself. Lead by example and you’ll see giving improve on its own.

 

Simplify giving

Relying on cash or check payments can put your church on a higher risk of fraud and theft. Luckily, the world has progressed well beyond the collection tray. Many organizations can now accept donations by debit or credit cards on kiosks in their lobbies. Online giving has become extremely popular with churches and members alike, creating a seamless way for churchgoers to show support – even if they miss a service.

 

Keeping your church financially healthy

You don’t have to be a certified accountant to ensure financial stability for your congregation. Define your goals, set a budget, keep your expenses in line, and foster consistent donations. By following good financial practices and strategically preparing for the unexpected, you are sure to advance your church’s mission.