Churches are well known for being safe havens for those in need. In fact, many churches have programs specifically designed to help people who are short on money or need a place to stay. Interestingly, many people overlook the fact that a church is run like a conventional organization.
This means that it needs to handle its finances accordingly. Let’s explore everything you need to know about managing church finances.
Set Financial Goals
As with managing finances at any other organization, it’s imperative that you set financial goals for your church. The good news is that church accounting is highly similar to traditional business accounting. So, there isn’t any highly specialized, convoluted information that you need to know about.
You should be aware, though, that churches typically deal with a large amount of money in comparison to most businesses. In fact, it’s not uncommon for larger churches to manage millions of dollars per year. In general, your financial goals should be to improve the experience for your members as much as possible.
This means building renovations, expanding to other campuses, etc. As long as you have concrete goals in mind, you’ll find it much easier to reach them in the future.
If you want to avoid issues down the road, you’ll need to record everything that your church is financially involved in. Yes, this even means recording donations. Just like how businesses need to keep track of all of the sales they make, your church needs to maintain an accurate log of all sources of income.
Unfortunately, the IRS is not always forgiving if you fail to satisfy this obligation. More specifically, you may experience significant financial penalties if they deduce that you have been intentionally underreporting income or other financial details.
You might be wondering why a church would even have to worry about the IRS due to being a tax-exempt organization.
Churches must satisfy a handful of criteria in order to remain tax-exempt. If an investigation discovers that a church does not satisfy these criteria (even by mistake), you could find yourself in trouble.
Take Advantage of Specialized Church Software
Managing church finances by hand is often a highly tedious process. This becomes truer for larger organizations. So, it’s in your best interest to take advantage of specialist software.
These are programs specifically designed for churches. This means that they have certain details you typically would not find for business finance software.
For example, high-quality church finance software can allow you to easily record your donation amounts. It’s worth noting that you may need to train members of your church on how to use this software appropriately.
Many smaller churches may be used to handling finances manually. The good news, though, is that it is relatively easy to learn and will be a life-changing addition to your financial management strategy.
You can check out this resource to learn more about reputable software: iconcmo.com
Have a Strong Awareness of Your Ongoing Expenses
One of the largest issues that churches encounter is improperly handling their ongoing expenses.
In some cases, those in charge of the church may not even be fully aware of them. To elaborate, it’s imperative that you consider all ongoing expenses and not just the major ones like rent and utilities.
This includes funding community outreach programs, housing allowances, missionary spending, etc. This information will serve as the foundation for any budget that you create. As long as you stay on top of this data, you will be able to identify key areas that need improvement.
For instance, you may be allocating too much money toward a membership acquisition program that simply does not acquire enough new members.
Maintain a Sufficient Emergency Fund
There will inevitably be times in which you do not receive as much income as normal. For example, the global pandemic prevented many people from visiting their regular churches.
Although it was still possible to make donations under any circumstances, not everybody who normally donates chose to do so in this manner. As a result, many churches took a financial hit. Other issues that could arise include natural disasters, economic recession, etc.
For these reasons, it’s imperative that you keep a sufficient emergency fund. This will allow you to stay afloat until you are able to come up with a strategy to accommodate your situation.
Otherwise, is entirely possible that your church could experience the same financial difficulties that businesses do. A worst-case scenario could involve having your church property repossessed.
Don’t Be Afraid to Ask For Help
You should never be afraid to ask for help if you are truly in need. After all, members of most churches are fully prepared to make a contribution to the well-being of the church itself. As long as you can justify asking for donations, it’s worth doing so.
You should also be entirely transparent with how this money will be used. Otherwise, you risk eroding the trust your members have in your church. This is something that could cause issues that outweigh the financial difficulties you experience.
Properly Managing Church Finances Is Essential
If you overlook this factor, you run the risk of being unable to accommodate your members or pay your bills on time. The above guide about how to manage church finances has invaluable information that will help ensure that your church stays on track.
Looking for more tips that can help you out later on? Check out the rest of our blog for plenty of more useful information.