How to Solve Your Church's Financial Crisis

Written by Founder Raul Rivera on Jan 24, 2017 in Church Management

No one is better acquainted with the fact that churches need money in order to operate than pastors and church leaders. Amazing things can be accomplished through your ministry when money is used with wisdom and ingenuity. 

However, knowing how to harness the asset of money without being ruled by it can be very difficult. It can be easy to find yourself with thousands of dollars in your bank account and still struggling.

The key to fixing your financial struggle may be tied to your church’s bookkeeping practices. At our conferences we discuss key bookkeeping responsibilities and ideas for a strong accounting system. 

In this article, I will highlight steps that will correct issues in your bookkeeping system, and help your ministry have a better grasp on its current financial status and strengthen its financial future. 

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The key component of good bookkeeping

The fact is that good bookkeeping requires consistent, weekly attention. While we begin with the best of intentions, staying diligent with maintaining financial records can become tiresome. 

It is tedious and time consuming work. The rigors and on-the-spot demands of ministry work can cause administrative work (especially bookkeeping) to take a back seat. 

The fact is that good bookkeeping requires consistent, weekly attention.

To ensure that your records are well maintained over time, you will be required to do the following: 

  • Commit to study which system of bookkeeping will work best for the duration of your organization and its growth; and
  • Consider outsourcing this vital aspect of your church in order to give you more time to focus on your other pastoral responsibilities.

In fact, one of the reasons we started the StartCHURCH Bookkeeping Service was to give pastors the confidence that their church’s books are kept in excellent condition so that they can spend more time growing what God has given them to lead. 

Remember, solid financial records help you to maintain the financial health of your church. 

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Understanding your ministry’s financial records

One of the best ways to get a clear picture of your ministry’s financial status is by using what is called a statement of financial position. This is a report that is also known as the balance sheet and has three main components.

1. Assets:

In the simplest of terms, assets are the things that your church owns, such as cash, vehicles, buildings, chairs, office equipment, and more. Knowing how much your church has in cash and in hard assets is very important. A good statement of financial position will show the designations for the cash on hand and list the fund balances.

Knowing how much your church has in cash and in hard assets is very important.

For example, a church may have $45,000.00 in cash, and the statement of financial position may show in the fund balances that some of the cash is for the building fund while the rest is for the general operating fund. 

(See the example statement of financial position below.)

Notice how the church has $45,000.00 in cash and how the fund balances show each category where the money is separated. Some of the money is for the building fund, some is for missions, and the rest is for the general operating fund. 

2. Liabilities:

These are the debts of the church. In this part of the report, you can view how much the church owes in debts. Liabilities may include mortgages, vehicle notes, credit cards, and more.

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3. Net worth:

Also known as equity, the net worth of a church in financial terms is calculated by the sum of the assets minus the sum of the liabilities. Notice how the church below has $73,500.00 in net assets, while total liabilities are $6,980.00. If you do the math ($73,500.00 - $6,980.00), you realize that the net worth of the church is $66,520.00.

   

Assets

Cash

Checking account #1

$1,200.00

Checking account #2

$43,800.00

Total cash on hand

$45,000.00

Other assets

Church van

$12,000.00

Other church property

$16,500.00

Total other assets

$28,500.00

Total assets

$73,500.00

Liabilities

Current liabilities

Church van

$3,000.00

Credit card

$3,600.00

Payroll tax liabilities

$380.00

Total liabilities

$6,980.00

Fund Balances

General operating fund

-$600.00

Building fund

$40,000.00

Mission fund

$5,600.00

Total fund balance

$45,000.00

Net worth

$66,520.0

Where many churches tend to trip up

Using the example above, we see a red line in the statement of financial position that may not have been easily seen under other circumstances. The fund balances may have included some restricted funds that could not be used for any other purpose because the church had bound itself to use the money for certain projects like the new building and missions work. 

Notice how the church's general operating fund is -$600.00. This figure indicates that the church had to use restricted funds designated for other purposes to operate.

(Recommended reading: "Restricted Offering vs. Designated Offering")

Take note that although the total of the building fund and the mission fund is $45,600.00 ($40,000.00 + $5,600.00), there is only $45,000.00 in available cash. 

In a situation like this, a church has two options.

  1. It can continue to dip into the restricted funds; or
  2. It can establish a line of credit against the restricted funds to cover the expenses of the church in the short term, and then rework the budget of the church. 

Neither answer is simple or desirable.

How healthy are your church’s financial books?

A good bookkeeping system will warn the church, far in advance, of any potential financial trouble. Even though the giving at the church may seem good, it does not mean that the appropriate departments of the church are receiving the funds they need to operate.

By using our Bookkeeping Service, you will work with a personal bookkeeper and seasoned CPAs that will help streamline and make sense of your church’s financial records. 

You will have the peace of mind knowing that your records are in great hands and that our staff is invested in helping you to have the best books possible. If your church desires to establish a powerful internal structure, I invite you to click on the link below for more information. I know you will not regret it!

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Please feel free to comment. We always appreciate good dialogue. However, we do moderate each comment to ensure that it is on topic and not derogatory to other participants. We ask that you keep your comments brief and pertinent to the topic so that others may benefit.

Blessings,
Raul Rivera


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