Finances

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. 

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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.

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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.

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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.

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