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Churches, like most nonprofit organizations, rely on the generous donations of their members.
The manner in which those resources are managed can be the difference between a healthy financial statement and one that sets off alarms.
The financial viability of a Church rests on its ability to manage its money.
This creates the need for churches to figure out the best way to manage their limited financial resources.
Church leaders are often challenged with ensuring there is continued funding to support ministry programs and fixed operating costs.
This can be difficult because the financial needs of a church can be significant, and juggling limited resources can be stressful.
6 Financial Management Tips For Churches
1. Strategic Planning
Developing a strategic plan is one of the first steps to strong financial management.
Taking the time to set a course of action, and develop church goals, and a plan is the key to getting there.
The advantage of developing a strategy and plan, is that the plan considers the financial needs of every area of the church.
The plan also commits to designating resources toward those critical areas that will sustain and grow the ministry.
For instance, if your church has a strategy to build a soup kitchen for the homeless in your area, there will be funding requirements necessary to achieve this objective.
A well thought out plan also takes into consideration those financial policies and reporting measures that are necessary for responsible financial management.
2. Realistic Revenue Projections
Many churches are trying to operate with uncertain revenues and should be making realistic projections of donations that will be used to fund the budget.
One way to address this is to consider a bi-annual or quarterly review of projections to ensure accurate financial targets for the year.
For instance, most churches see a decline in giving during the summer months and an uptick toward the end of the year. Set a monthly average for revenues and check them several times a year to compare actual vs projected revenues.
Budgeting is essential for successful financial management and church budgets are tools that help leaders achieve objectives.
But more importantly, it helps to control unbudgeted spending.
For instance, a church budget would not allow spending on an unbudgeted piece of equipment during a budget year.
Investing the time, and committing the resources, to creating a budget can have a significant impact on the financial health of the church and can provide the necessary financial resources to support the church strategy and goals.
4. Oversight And Accountability
Once a budget is set, oversight and accountability for adhering to the budget is important because it keeps the organization from spending resources that are not allocated.
Department managers are responsible for variances and adherence to the budget.
For instance, the facilities manager is responsible for ensuring that their department budget is spent only on those items that were approved during the budgeting process.
An active Church Finance Committee and a structured performance management process, is a great way to ensure accountability for budget oversight and spending.
Communicating about finances can be intimidating, particularly for small churches. Members ask a lot of questions and sometimes force answers about spending.
Commit to financial transparency and solicit feedback from church members on cost-saving ideas, strategies for raising funds, and make them aware of financial challenges.
As difficult as it is to present the cold hard facts, a church community loves to rally around a cause to help resolve problems.
For example, if an unexpected major facility repair has occurred, let members know about the unexpected cost and offer an opportunity for them to get involved and help financially.
Create a consistent communication process, share budget information, and provide avenues to answer any financial questions that members may have.
Remember that you can never communicate too much. Err on the side of more. More is always better!
6. Be Prepared For A Financial Emergency
Make sure your church has a plan in place in the event of a financial emergency and use positive profit margins to fund an emergency account.
When you budget for an emergency you create a financial buffer that buys you the time needed to make adjustments and spending changes in the event of a true financial emergency.
For example, if you live in the northeast during the winter months, you are painfully aware of the weather conditions that can impact church attendance and giving.
Be prepared for those unexpected snow Sundays with a buffer to pick up the financial slack.
Make sure you have a financial plan in place to offset those uncontrollable donation variances.
Many church financial problems can be avoided by good planning, consistent budgeting, and accountability for spending.
Church leaders should embrace structured processes to ensure the resources are available to keep the organization in the black and moving forward, regardless of the economic climate.