Keeping the lights on and the doors open at a church takes more than religious commitment. It also takes money. Building a lasting religious community requires giving careful thought to how a church’s finances are managed. These are a few of the ideas that we think churches can use to develop better practices:
- Establish formal controls.
Internal controls have been a hot topic at large organizations for a while now. For a big business with a large staff and plenty of resources, exhaustive procedural reviews and detailed financial workflows can be a practical way to ensure audits, investor reports, and other critical governance processes are handled accurately. A smaller organization like a church can benefit from adopting some of the principles behind internal controls ideas. A good place to start is with written rules governing how invoices are paid and who must sign off on financial commitments. Once such policies are in place, they also need to be audited and enforced.
- Understand revenue and budgeting.
Although having a clear picture of future revenue may seem like an obvious step, many churches fail to study the issue with sufficient depth. Does the church keep track of how often members contribute, and how much? Does it understand how past trends might inform projections about the future? Good data about projected income is key to producing a reliable budget.
- Follow strict budget rules.
Budgeting for any organization can be a difficult task, especially when painful tradeoffs are necessary. For many churches, uncertainty about revenue can make crafting a budget especially hard. Still, the effort is crucial for establishing good habits. Budgets can always be adjusted, but by following strict procedures a church can avoid snap judgments and expensive mistakes.
- Don’t hesitate to get sophisticated advice.
Churches with lean budgets can benefit from professional advice, which in some cases can even mean turning over aspects of financial management to an outside firm. For churches with substantial resources, the goal should be to turn a large reserve of cash into a sustainable financial foundation. An outside advisor can help a church explore approaches to financial management that it might not otherwise consider, as well as identifying weaknesses that need to be resolved.
The Church Law Center is here to help
The Church Law Center of California provides governance advice to churches and other nonprofits.
We work with clients to review their financial practices and explore ways to improve upon them. To schedule an appointment call us at (949) 689-0437 or reach out through our contact page.