Estimated reading time: 6 minutes
Inflation is at its highest level in 40 years and has impacted us all. Home budgets are squeezed, and sacrificial giving is difficult for many.
Rising interest rates make borrowing more expensive, and price increases resulting from supply chain issues have become an inflationary environment challenging to all.
In a lot of ways, it feels like 2008 when the bubble of prosperity popped, and those who had no cushion fell.
It Is Not Easy To Manage Church Finances
Managing church finances is challenging at best. Projecting revenues and budgeting on the tithes and generosity of members can be a best guess.
Sure historical numbers help, but when a church hits the summer months, it is easy to hold your breath and brace yourself for the unknown.
So, what can a church do to stabilize its finances and sleep better at night?
ECFA, polled some church administrators about what they thought was crucial to church financial health. What they said was interesting.
1. Adequate Cash Reserves – is there enough money in the bank to sustain the church in an unexpected revenue decline?
2. Reasonable Church Debt – is the debt that a church takes on in line with the size of the church, giving levels and church growth?
3. Reasonable Percentage of Total Compensation to Total Operating Expenses – Is total compensation reasonable and at or below benchmarks of 50%?
Another financial thought leader – Dave Ramsey – lays out 6 Steps to Church Financial Health. He challenges churches to examine their operations and focus on these six areas.
1. Save Money – Set a goal to save 3-6 months of operating expenses to set aside for an unanticipated emergency.
2. Get Out of Debt – Work toward eliminating all debt other than the mortgage. This frees up cash for different operational needs.
3. Invest in Employees – Church employees work for a church out of passion and calling. Compensate them fairly so they don’t feel torn between a job that pays better than one they feel called to.
4. Set Up a Big-Ticket Fund – It is easy to ignore those big-ticket items until the HVAC system goes out in July or the roof leaks in January. Set aside money, so there is funding available when the inevitable happens.
5. Work to Pay Off Mortgage – While it may feel like an overwhelming goal, focus on paying off the mortgage so those funds can be used to fund church programs and mission endeavors.
6. Save for the Future – Set aside a percentage of income to start saving for what is next. It is always easier to make a spending decision if the money is on hand than if you need to think about borrowing.
So, all this advice is nice, but what does it take to do this?
Save money, get out of debt, invest in employees?
7 Tips to Help Your Church Manage Its Finances
1. Create a System for Financial Oversight
Accountability happens when people are responsible for getting the job done.
Organize a Budget Review Committee and charge that group with managing spending, creative cost control, and debt management.
This team should meet monthly and address budget variances and approve un-budgeted expenditures.
This team should also be involved in the goal-setting process to ensure that church goals have the needed financial support.
For instance, if the church has a goal to develop its youth ministry, the budget review committee will work with leadership to develop a funded budget to meet the objectives of that church department.
2. Develop a Church Budget
Budgets are used to control spending. A church budget should be created once a year and monitored monthly.
Each ministry department should have responsibility for helping to create the budget as well as abiding by the budget.
Employees should be held accountable for keeping spending within budget limits.
For instance, if department managers go over budget, there should be very specific consequences for not adhering to the budget.
3. Determine A Percentage to Save
Financially healthy organizations save intentionally.
Budget a percentage for savings. If finances are tight start with a small percentage but work toward saving at least ten percent.
For instance, a good rule of thumb is to save five percent. These consistent savings will help to create a buffer that can be used for a rainy day or to fund an expansion project.
4. Invest In Employees
People who work for a church do so because they feel called to support its mission. If you find a good employee,, do all you can to keep them. It is expensive to find, hire, and train their replacement.
Compensate employees for what they do in a fair way and in line with what other organizations pay.
Create a compensation strategy that looks at the whole benefits package for employees to ensure that staff are fairly compensated.
5. Teach Giving
Members who are buried in debt struggle with giving.
Churches that are strong financially have developed a culture of giving, and tithes are second nature to its members.
This is the direct result of specific, and targeted teaching on the biblical principles of giving.
Once a church membership understands this principle, they are generous with their support for the church.
6. Financial Transparency
Churches get in trouble when they try to hide spending from members.
Be transparent with church spending, share budget details and embrace member involvement in the process.
When members understand the real cost of heating a building, they can relate to the burden of bill paying.
That transparency will help them understand and commit to giving.
7. Create a Debt Reduction Plan
Few things happen without a specific plan.
Take a hard look at church debt and develop a plan to eliminate it.
Start with budgeting for debt payments, then get creative with soliciting help from members.
Target high-income earners and make the need known.
Also, think about teaching members about legacy giving and the benefits it could bring to the church at the time of death.
A sensitive subject but very effective if done the right way.
Don’t Forget – This is God’s Money
At the end of the day, a church has responsibility for managing God’s money.
People tithe on their income because they embrace that Biblical principle and God relies on church leadership to ensure that those tithes are used to further His kingdom.
Set aside some time, develop a team and work toward getting your church to a healthy financial state!
How does your church manage its financial resources?
Learn more tips for managing your church by enrolling in our Church Administration Course.