Finances

Stop Fighting Over the Budget – There’s a Better Way

I still remember the meeting we called “the war room.” It wasn’t a prayer meeting. It was our annual budget showdown — a room full of department leaders, each one fighting to protect their line items. Everyone felt like they had to defend their territory just to keep the things they needed to do their jobs. It was exhausting, divisive, and an expensive use of the church’s time. After nearly two decades working in and alongside churches, I can tell you that the budget war room is not unique. It’s happening in churches every budget season. And it doesn’t have to. During a recent webinar with Martus Solutions, we discussed practical ways churches can create budgets that reflect and support their mission. Read on for a recap of our discussion. The Real Problem with How Most Churches Budget Most churches either copy last year’s budget or ask departments to submit requests and spend months cutting. Both approaches share the same flaw: the staff ends up setting the vision instead of the leadership. Ministries build budgets around their own priorities, you get silos instead of synergy, and a budget that reflects habit rather than calling. Four Shifts That Make the Difference 1. Leadership sets the vision before anyone opens a spreadsheet. Before a single request gets submitted, leadership needs to answer: What are we called to do this year? These are your “big rocks” — the priorities that go in first. If leadership doesn’t define them upfront, the staff will fill the vacuum. 2. Pre-balance the budget before departments submit anything. Assign each department a spending target based on the vision leadership has already set. When staff know their number upfront, they build to it, and multiple rounds of cuts nearly disappear. A helpful benchmark: 50% compensation 10% outreach and missions 10% direct ministry costs 30% facilities and operations 3. Create a separate lane for vision requests. Set aside roughly 10% as “budget addition requests.” This is a place for staff to bring new or bigger ideas without inflating the baseline. Leadership evaluates those requests on strategic value, and the process often surfaces what God is stirring in your team long before it becomes a budget emergency. 4. Give every ministry leader visibility throughout the year. Approving the budget isn’t the finish line. When ministry leaders have real-time access to how they’re tracking, ownership in building the budget and living by it grows significantly. Watch the full webinar What to Look for in Budgeting Software If your process still runs on spreadsheets, you’re managing the tool instead of leading with it. When evaluating software, here’s what matters for churches: Ministry-leader friendly — your children’s pastor shouldn’t need a finance degree to use it User-level controls — each person sees only what’s relevant to their role Real-time reporting — budget-vs-actual visibility all year, not just at year-end Enterprise-level security — your financial data deserves real protection Accounting system integration — no duplicate entry, no spreadsheet exports One Tool Built With Churches in Mind Martus was built for exactly this. Founder Bill Cox created Martus after watching his son Bradley struggle with the same challenges while pastoring a small but growing congregation: limited resources, non-financial staff trying to make sense of complicated tools, and a mission too important to be slowed down by spreadsheets. That firsthand understanding of ministry is baked into everything Martus does. It’s built from the ground up with church leaders and nonprofits in mind, and it shows. Ready to Build a Budget That Reflects Your Mission? The budget process doesn’t have to feel like a war room. With the right process and tools, it can become one of the healthiest leadership exercises your church does each year. If you’d like help rethinking your approach, whether you’re a church plant just getting started or a multi-site church that’s outgrown your current process, this is exactly what we do at Church Finance Pros. Schedule a free discovery call at churchfinancepros.com.

Stop Fighting Over the Budget – There’s a Better Way Read More »

When Should a Church Move to a Fiscal Year?

Most churches default to a calendar-year budget because, honestly, it feels normal. January through December is familiar. Tax forms follow the calendar year. Payroll reporting follows the calendar year. Most accounting software defaults to it. But just because something is common does not necessarily mean it is the best fit for how churches actually operate. Especially churches nearing the $2M revenue milestone (when we most commonly see this question being asked). For many churches, moving to a fiscal year can create healthier financial rhythms, better planning visibility, and a less stressful budgeting process overall. And despite what some church leaders assume, making the switch is usually much simpler than expected. The Biggest Reason Churches Move to a Fiscal Year For most churches, giving is not evenly distributed throughout the year. A disproportionately large amount of giving tends to come in during Q4. Between holiday generosity, year-end giving campaigns, and increased Christmas attendance, December often carries a lot of financial weight. That creates a common problem with calendar-year budgeting: Church leaders spend most of the year wondering whether December will save the budget. If giving runs behind during the spring or summer, there is often an unspoken assumption that year-end giving will close the gap. Sometimes it does. Sometimes it doesn’t. The problem is timing. By the time leadership fully knows where the year landed financially, the year is basically over. There is very little time left to adjust spending, revisit staffing plans, or respond strategically. A fiscal year changes that dynamic. When the holiday giving season lands in the middle of your fiscal year instead of at the very end, you gain visibility much earlier. Halfway through the year, leadership already has a much clearer picture of whether the budget is on track. That gives churches time to: Instead of holding your breath waiting for December, you can manage the year with much more confidence and clarity. A Fiscal Year Often Fits Church Life Better Churches rarely operate on natural January-to-December rhythms. In many parts of the country, attendance and giving patterns align more closely with the school calendar than the calendar year. For example, churches in areas with four distinct seasons often experience: For many churches, September feels more like the beginning of a new year than January does. That is especially true for churches with: A July 1 or August 1 fiscal year can align much more naturally with how ministry actually functions. It allows leadership to plan staffing, programming, and ministry initiatives around the seasons people are most engaged. Budget Season Stops Colliding with Christmas One of the most practical benefits of a fiscal year is simply when the budget process happens. With a calendar-year budget, churches often build next year’s budget during their busiest ministry season: That is a lot to stack on pastors and ministry leaders all at once. A fiscal year can move budget planning into a calmer season of the ministry calendar. Many churches with a July fiscal year begin budget planning shortly after Easter. That timing gives leadership teams more mental bandwidth to think strategically and collaborate thoughtfully. It also allows church staff to focus on ministry impact during the holidays instead of balancing ministry demands with budget spreadsheets. Does Changing to a Fiscal Year Affect IRS Deadlines? Usually, not much. This is one of the biggest misconceptions churches have about fiscal years. Most IRS-related deadlines still follow the calendar year regardless of your church’s fiscal year, including: Those deadlines generally stay exactly the same. The primary exception is Form 990-T, which applies to unrelated business income. Since relatively few churches file a 990-T, this typically affects only a small percentage of organizations. For most churches, switching to a fiscal year is primarily an internal operational decision rather than a major tax or compliance issue. In many cases, the process is as simple as: A Few Things to Think Through Before Making the Change A fiscal year can be extremely helpful, but there are a few operational details churches should plan for ahead of time. Compensation Budgeting Can Get Slightly More Complicated Churches with hourly or minimum wage employees may need to estimate future wage increases during the budgeting process. This is especially true for positions like: In many states, minimum wage increases happen on January 1. If your fiscal year starts in the middle of the year, your budget may need to account for wage changes that have not officially been announced yet. (Note that we’ve seen several states doing mid-year minimum wage increases also…) It is usually manageable, but it does require a little more forecasting. Health Insurance and Benefits May Need to be Re-Aligned Some churches also choose to align their employee benefits cycle with the new fiscal year. That may include adjusting: Aligning benefits with the fiscal year can make budgeting more predictable because compensation and benefit increases are reviewed together during the same planning process. However, making those changes may require coordination with: Not every church will need to make this adjustment, but it is worth considering before the transition. What Does the Transition Process Actually Look Like? The good news is that changing a fiscal year is usually much less dramatic than people expect. Most churches transition by creating a short “stub-period” budget. For example: Let’s say a church currently operates on a January-to-December calendar year but wants to move to an August-to-July fiscal year. Instead of building a full 12-month budget, the church would create: That means the transition year temporarily includes two budgeting cycles: The bridge budget is usually fairly straightforward since it primarily exists to transition the reporting cycle. From an operational standpoint, the process is often simpler than church leaders initially expect. Final Thoughts A fiscal year is not automatically better simply because it is different. The goal is alignment. The best financial calendar is the one that helps your church make better decisions with more clarity and less stress. For many churches, especially those with strong seasonal giving patterns, a

When Should a Church Move to a Fiscal Year? Read More »

6 Practical Ways to Achieve Excellence on a Budget

We’ve all experienced seasons where the budget is a bit tight – especially when the economy isn’t thriving. However, we still want to provide the absolute best for our communities and congregations. So how can you achieve operational excellence on a shoestring budget? Here are some practical tips you can implement at little, to no cost: Tip #1: Find the grammar police Look for a volunteer who is a perfectionist when it comes to correct spelling and grammar. Ask that individual to proofread all of your written communications. This includes the church website, social media posts (yes, grammar still counts in social media), brochures, letters, flyers, worship lyric screens, etc. Poor grammar and misspellings are perceived as a lack of professionalism and excellence. Build your church’s professional image and reputation by being a stickler in this area. All without breaking the budget. Tip #2: Honor volunteers Honoring volunteers involves respecting their time and efforts. For example, let’s say you decide to ask volunteers to do various beautification projects around your church on a Saturday. When you respect their time and have an organized workday, your volunteers will appreciate how well you planned the assignment and are more likely to serve again. Tip #3: Make a good first impression While God looks at the inside, people still judge by outward appearances. While we wish that wasn’t the case, we need to be aware of the first impression people get from your church facilities. Start with a facility evaluation and clean up or repair any areas that need attention. Also, take a look at the office areas. This may sound nitpicky, but a clean, organized office communicates an organized approach to serving your congregation and it provides a professional environment for your staff. You don’t need expensive artwork on the walls or brand new furniture. A simple décor that is well maintained shows that you’re an excellent steward of your resources. Tip #4: Pay attention to event details For example, if you provide childcare at an event, make sure you know how many children you’ll need to care for. Ask attendees to provide the number of children and their ages in the registration form so you’ll know how many childcare workers you’ll need well in advance. Also, consider the safety aspect of events. Make sure you have emergency procedures well developed and communicated to staff and event volunteers. Tip #5: Communicate effectively When developing communications for volunteers or event participants, consider your audience.  What questions would you have if you knew nothing about your organization or the event?  What would you be concerned about?  How would you want to receive the information (email, phone, text message, handouts, etc.)?  Tailor communications to different audiences if needed to address their varying concerns. Tip #6: Stay tuned to trends Using an outdated design scheme for a volunteer appreciation night or not knowing about a social media trend are quick ways to damage credibility and look “behind the times”. Try to stay up-to-date on current trends in social media, graphics, design ideas, etc.  Ask volunteers of various ages what they think of your website, communications, videos, and social media channels. Take their feedback into consideration and make the necessary adjustments. If your logo and graphics need to be updated, check with a local community college and ask if any of their graphic arts students need some experience and will work for a reduced fee. You could get a great update and the student will gain valuable experience. These are just a few ways to ensure excellence in various areas of the church. Excellence is possible even when on a tight budget. As you make the most of the resources you do have, trust God to take your efforts and expand your capacity.  Being faithful in these little things really is a big deal. 

6 Practical Ways to Achieve Excellence on a Budget Read More »

3 Tips to Prevent Financial Fraud at Church

In 2017, authorities charged a former church employee with embezzling over $300,000. Authorities alleged the former financial secretary charged church credit cards to make personal purchases and used church funds to pay her own personal debts.  This is a reminder of why we need controls to prevent fraud and steward the money God entrusts to our churches. I don’t know the leaders of the church involved, so I don’t know what controls they had at that time. However, here are a few simple steps you can take to reduce the risk of this happening at your church: Tip #1: The person authorized to make credit card charges should not reconcile credit card statements This is referred to as “segregation of duties.” If I have a church credit card (or access to them) and I’m also the sole person who reconciles those statements each month, it would be easy for me to make fraudulent charges without anyone noticing. Don’t leave that temptation in front of someone or expose your church to that level of risk.  Instead, divide responsibilities. Have someone without access to church credit cards be responsible for reviewing monthly statements and monitoring charges. Tip #2: Consider outsourcing By hiring an outside company to reconcile the accounting records each month, you increase the chances of catching fraud.  This is how the church in the story mentioned above found out about the embezzlement. The outsourcing company shouldn’t have direct access to your church’s bank or credit card accounts. They should be responsible for entering transactions into your church’s accounting software and/or handling monthly reconciliations and reports. Tip #3: Separate Accounts Payable Functions The person who enters vendors into the accounting software shouldn’t be able to enter invoices or print checks. Again, this goes back to “segregation of duties.” Here’s the scenario: You can set up security rights within an accounting system to divide responsibilities. This enables you to keep Joe from creating a new vendor, entering an invoice, and cutting a check to pay that fake invoice.  If you don’t have enough staff members to separate responsibilities to this level, you have a couple of options:  These aren’t the only internal controls you should have at your church, but they’re a good start.  When people trust you with their tithes and offerings, they trust you to use and guard that money wisely. Invest the time now to put proper internal controls into place. Otherwise, you may be forced to invest time later into gathering evidence to prove fraud and deal with the aftermath at your church. Prevention is much less expensive (both financially and from a trust perspective) in the long run.

3 Tips to Prevent Financial Fraud at Church Read More »

9 Key Questions to Ask Potential Church Accounting Outsourcing Providers

Leading a church involves all we typically think of as “pastoral” work plus a plethora of behind-the-scenes tasks.  One significant responsibility of church leadership is to be an excellent steward of church finances.  As people tithe, they’re trusting the church to use that money wisely.  To make that happen, you need strong financial controls and processes in place.  While many churches may hire someone to handle the accounting functions in-house, another option is to hire an outsourcing company.    Why should a church consider outsourcing? Reason #1: Expertise If you hire an outsourcing company that works with several churches, you’ll benefit from that breadth of experience.  They can tell you what’s worked for other churches in setting up restricted funds, establishing an annual budgeting process, and how to generate financial reports for lenders.  You may also be able to leverage the knowledge of CPAs along with having someone handle the day-to-day bookkeeping. Reason #2: Reduced fraud risk Unfortunately, churches aren’t immune to theft.  There are several examples of employees stealing from the church.  One way outsourcing can help prevent theft is by ensuring segregation of duties.  For example, an outsourcing company will have processes that require that the person who can create a new vendor within the accounting software is not also able to approve an invoice for payment or sign a check.  This keeps an individual from creating a new (fake) vendor, entering a fake invoice, approving it for payment, then signing a check to pay that invoice. Reason #3: Increased focus on finances Let’s face it – there are many instances in the schedule of a church where it’s “all hands on deck.”  Every staff member, regardless of function, gets pulled into finishing up Christmas decorations or setting up for an event.  When an outsourcer handles the accounting functions, you’re able to focus on church finances no matter what you’re dealing with at the church. Before you hire an outsourcing company to handle your church’s accounting, take the time needed to evaluate potential vendors carefully.  Here are several questions to ask potential outsourcers: Question #1: Does your company focus on serving the church? The accounting rules and processes for churches are different from for-profit businesses and even nonprofit organizations. You want an outsourcer with several years of experience working with and for churches.  Question #2: Do you have church clients of a similar size as ours? If an outsourcer only works with mega churches and yours averages 200 on a Sunday, that won’t be a good fit. A company that works with a variety of church sizes and structures should have the experience necessary to provide your leadership team with the financial reports and support required. Question #3: How long have you been in business? A company that’s been in business for several years will have references and a proven track record of how they serve their clients. While newer businesses can offer excellent service, they will require even more due diligence in the selection process than one with a long history of serving churches. Question #4: What are the qualifications of your staff members? An outsourcing vendor where most employees have an accounting degree plus several years of experience is a great place to start. You’ll also want to ask about their review processes to see if a CPA reviews certain reports or transactions to confirm that their staff completed their work accurately. Question #5: What accounting software do you use? This goes to discovering whether a vendor will require your church staff to use the accounting software the vendor uses or not. If you’ve already invested a significant amount of time and money into your current accounting system, that could be a deciding factor for one vendor versus another. Question #6: How will our team and yours transmit financial information? Depending on the tasks you’re outsourcing, you’ll need to provide the outsourcer with financial data such as invoices, purchase orders, bank statements, payroll changes, and more. The outsourcer will need to provide your team with financial information as well. Ideally, you’re both able to access the accounting software to transmit most of that information. Find out if a potential outsourcing company has a secure online portal to share financial data and documents as well. Question #7: How do you keep your client’s financial records secure? Financial information is sensitive data and needs to be treated as such. Hacking and data theft are real risks, so you’ll want to look for a company that takes prudent steps to protect their client’s data. Ask about their protocols and processes to secure data online and to keep any paper records secure as well. Question #8: What does your new client on-boarding process look like? The answer to this question can help you gauge how detailed and intentional a company is when it comes to getting new customers up and running. Most companies should have a questionnaire for you to fill out, a standard checklist that they complete with every church client, and likely a series of working sessions to ensure a successful start. Question #9: What financial reports will you provide and at what frequency?  You’ll want at least the standard monthly reports to help you analyze the church’s financial health and progress. However, a vendor might also provide weekly reports on giving totals, cash flow projections, and other key metrics that can help your leadership team make informed decisions. Entrusting an outside organization to handle the day-to-day accounting functions of your church can be a daunting prospect. However, outsourcing can free up time to focus on other areas, ensure proper financial processes, and reduce fraud risk. If you’re considering outsourcing, take your time to find the best vendor for your church and establish an excellent relationship from the start.

9 Key Questions to Ask Potential Church Accounting Outsourcing Providers Read More »

7 Tips for Stewarding Church Finances

As people tithe and give, they’re trusting church leaders to use that money wisely. To maintain excellent stewardship of church finances, you need well-defined policies and internal controls in-place. These practices can greatly reduce the likelihood of financial fraud and increase wise usage of church funds. #1: Always have at least three people present while counting the offering Although text-to-give and online giving are increasing in popularity, many people continue to give via cash or checks. If you have three or more individuals present while counting the offering, it’s much harder for any one person to steal from the congregation. #2: Establish levels of financial authority Determine, document, and communicate who has authority to do the following: For each of these scenarios, it’s wise to have more than one unrelated person involved in these processes. This policy protects the church from individuals working together to commit fraud and those with the authority from unwarranted accusations. #3: Define and document a benevolence request process Benevolence requests pull at our heartstrings, making it difficult to offer an objective response. To ensure fair treatment and good stewardship of church finances, you should develop a standard method for processing such requests. This should include a request form, specific criteria for why a request would be approved or disapproved, how the money will be dispersed, who has authority to approve the requests, and how the request will be documented from start to finish. #4: Develop a budget A budget is a plan for how the church will allocate the money God (and the congregation) entrusts to leadership. Each ministry department leader should propose what he/she wants to accomplish in the upcoming year and what funds they’ll need for that effort. Consolidate these requests and take the overall budget through the church’s review and approval process. You’ll likely need to do a few iterations before finalizing the budget for the upcoming year. #5: Review church finances monthly The senior pastor, executive pastor, and leader of each department should review financial reports such as budget vs. actuals for each ministry area on a monthly basis. Departmental leaders should explain any significant variances. This report should also be reviewed with the board, elders, and/or deacons. #6: Request an external audit Hire a neutral third party to audit the church’s accounting records annually and provide their findings to the senior pastor, board, elders, and deacons. This brings in unbiased experts to provide their opinion regarding how your accounting team is performing and the effectiveness of your accounting processes and policies. This process also provides another layer of accountability. Consider providing the results of this audit in an annual report to the congregation. #7: Hire experienced accounting personnel Hiring a member of the congregation to oversee your finance office due to a family relationship and the individual’s willingness to take a pay cut isn’t wise. You can’t afford to have church finances poorly managed, so invest in a qualified individual who has years of proven accounting experience. If you can hire a CPA, that’s great. If not, at least hire someone with an accounting degree and 5+ years of experience (with great references and a clear background check). Also, outsourcing tasks that require more experienced staff could be a more economical option.  Then have a CPA review your financial records at least annually. As your congregation entrusts you with their tithes and offerings, take these steps to ensure those finances are spent effectively and with integrity. It’s easy to overlook the back-office processes since they don’t immediately look like ministry. However, maintaining the trust of your congregation and the community is a foundation upon which you build ministry.

7 Tips for Stewarding Church Finances Read More »

Shopping Cart
Scroll to Top