Are Dual Signatures Required for my Church?

church banking

Are Dual Signatures Required for my Church?

This is a question we run into quite often.

If not as a question, we have churches all the time telling us that they have dual signatures required on their checks.

While I understand that dual signatures may provide the appearance of security, I’d contend that it does very little to protect your church’s money.

I’ve been around several organizations myself and even served as treasurer of a few.  In those, we required dual signatures on the checks and at the surface, it seemed fine.  The problem was, dual signatures often caused more issues than they solved.

Now, I’m not trying to do away or say that you don’t need to have dual signatures on your checks.  I’m not even saying that it’s a completely bad idea.  However I could contend that with modern digital banking, online bill-pay and e-commerce, the days of requiring dual signatures are dwindling.

For most churches, dual signatures are setup only because that’s the way its presumably always been done.  Nothing requires dual signatures inherently just because it’s a church.  That is usually a requirement that gets put in the church’s Bi-Laws and that is usually only because “everyone else does it”.

Requiring dual signatures on checks can be a hinderance to your ministry.

Dual Signatures Can Be Problematic. Here’s Why:

1. I have never seen a dual signor say no

Usually, I see dual signatures as more of a formality to give the appearance of security.  In most cases, when a check requires dual signatures, the second signor barely gives a look even to the amount of the check they are signing.

2. Banks often overlook signatures

Most banks are going through checks so quickly that catching a check that doesn’t have dual signatures is often missed.  I’ve seen several checks clear the bank even when dual signatures were required.

3. Dual Signatures creates unnecessary bottlenecks

Often, when dual signatures are required, waiting for the second person to sign can slow things down for no reason.

Again, my intent

4 Keys to Manage Your Church Budget in a Crisis

church budget planning

One of these two things are true.  
 
You’ve seen a shift in your giving amounts over the last few weeks. You haven’t seen a shift in your giving amounts, but you need a plan for the potential economic recession that is coming. 

The fact is that the unemployment rate across the country is at an all-time high. A huge percentage of businesses, business owners and employees have been affected by this pandemic and we will see how those numbers play out for the economy over the next several months. This is why – regardless of what giving at your church looks like today – you need to have a plan for how you will handle a potential financial impact to your church.  
 
Here are four keys to help you analyze and manage your budget in a time of crisis:  

Have a good understanding of what your numbers look like 

With any roadmap, unless you have a good understanding of where you’re currently at, you’ll have a really hard time coming up with a route that gets you to your destination. The same is true for your church budget.

In order to make smart budget decisions, you really need to have a good understanding of your current situation. This includes knowing your current numbers, trends and balances.  If you don’t know your financial numbers, you really don’t know your church. 

 Yes, I will admit that there are some guys that focus too much on numbers and completely miss their mission. But what we see more often is the reverse – pastors that have lots of big ideas and passion, but just guess when it comes to church finances.

Without keeping a pulse on the financial health of your church, there is no way to make wise financial decisions, plan for the future, or determine how and where you can actually save the church money. Knowing your numbers is simply good stewardship.  

What does this look like practically?  

If you’re a Simplify Church Bookkeeping partner, this part is easy. Just by looking at the monthly reports we send you, you should have a good handle on how your church is doing financially. Additionally, your account manager is available to provide you more detailed information, answer questions and alert you to potential problem areas. We can also generate year-to-date (YTD) reports to help you better understand the story your numbers are telling. Using this service can save you lots of valuable time and effort!

Okay, but what if you’re trying to manage things yourself? Well the most important report you need to analyze is your Statement of Accounts (Profit and Loss) Report. This will show you in detail what you took in last month and what you spent.  Some financial software solutions also offer the ability to match those numbers against your budget, so you can see how that your actual expenses are trending against your budgeted plan. 

You will want to review these reports for the last couple months, as well as look at your YTD trend. If you budget on a calendar year, you can look at the amounts from your first quarter as well. Obviously a lot has changed in the past several weeks as far as giving and income goes, but you want to understand what your expenses and income looked like before the crisis, so you can begin tracking any changes to that trend. Ask yourself, “What story are these numbers trying to tell me?

Analyze your critical expenses  

There is a very real chance that giving and income will go down for your church, either now or in the coming months. The good news is that without meeting physically, there are quite a few operational costs that should go down as well.  

Renters: If your meeting space is no longer open to public gatherings, you may be able to save on some rent expenses. Contact your landlord to discuss your options. 

Property Owners: If you own your building, you can keep the thermostat down and not heat or cool the worship center. 

Maybe you provide snacks, donuts and coffee during Sunday morning worship. While probably not a huge expense line in your budget, this is one place you can save a few dollars when cash flow gets tight. 

Go through your expenses line-by-line and see what you do not need or any expenses/services that can easily be cut out. Perhaps you have some subscriptions to a service that you aren’t really using. 

This is the time to determine which church budget expenses are critical and which ones are nice-to-haves. Understanding your critical expenses will help you analyze where savings can be found in your church budget. 

Things like payroll, insurance, and other fixed ministry costs will be much more difficult to cut during this time. If you haven’t already applied for the Payroll Protection Program to help offset payroll costs, watch this video to see if this might be a good option for your church.  (Yes, I know the funding ran out…but more funding will hopefully be available soon).

Pro Tip: if you own and have a mortgage on your building talk to your bank. They may have options available to you to help offset your payment during difficult times. Many banks offer interest only payments to churches during slow giving times.  Remember, you never know until you ask. 

Call your congregation to generosity 

Talking about generosity is one of those areas many pastors shy away from. Now is not the time to neglect talking about generosity. In fact, it is a disservice to both your people and your organization if you don’t talk about generosity in this season.  
 
It is much easier for us all to prioritize giving in seasons of abundance. Prioritizing giving to God in seasons of uncertainty and turmoil requires more faith and trust, but often leads to more opportunities to experience God’s faithfulness along with greater freedom and joy.  

Remind people each week how they can give – via online giving, text to give, or by mailing a payment to your church. You can also make it easy for people to drop off payments if you don’t have online giving options. Let people know that you have setup a convenient drop box to drop off their tithe payments.   

If you haven’t yet set up online giving at your church, now is the time to get started. And once people set up recurring giving, it makes it simple for them to continue to give generously (and it makes it much easier to predict your monthly income). Setting up online giving is quick and easy to do, especially if you use a system like Simplify Give. 

Beyond explaining the various ways to give, part of the discussion needs to be a reminder of why giving is crucial to the church, especially during a time when you’re not meeting together corporately. Explain how the funds are being used and how the church still is able to continue to function and to meet tangible needs through the generous donations of members.  

For a more in-depth discussion of this topic, we’ve put together a comprehensive guide on How to Talk About Giving & Create a Culture of Generosity in your church. You can access your FREE copy here. 

Prepare a church emergency budget 

Once you’ve analyzed your numbers and you know where things are at, it’s time to put together an emergency or contingency budget that will help you navigate through the next few months.   

  • What purchases were you planning to make in the next few months? Can any of those be delayed? 
  • Which expenses will help you move your church forward during this digital season?  
  • Which expenses are not serving your church right now? 

As you evaluate your expenses, think through you church vision/mission and strategic goals. Which expenses will help your church continue to grow? Which items fund your growth engines? Do you need to reevaluate any of your growth engines or goals?  

If you’re not sure why I’m bringing up the topic of growth engines and goals, check out this post on the seven “deadly sins” of church budgeting (and what to do about them) or this post on church budgeting 101.  

Now put your emergency budget together.  This is your financial plan to help your church not only survive this crisis, but to be ready for what comes next. You may never experience a dip in giving, but now you have a plan in place. As I’ve said many times, a budget is just a plan. But it’s an important one.  
 
It is fear of the unknown and uncertainty that breeds stress. When you put a plan in place, you relieve stress and better position yourself and your church to ministry to people during this very uncertain time.  

Look to the future 

In this season, many people are feeling confused and afraid. What better way for the church to show up than as people who are not operating out of fear, but out of faith and as good stewards of the resources God has given them. When your church has a solid financial foundation, you can focus your time and energy on being a light and a beacon of hope in this season.  

Not only that, you can position your church for whatever comes next. We don’t know when this season will end. What we do know is that once the guidelines on social distancing relax, there will be great need, but also an open door of opportunity. Will you be a church prepared to lead and serve and love through recovery and revitalization? Or will your church be focused on recovery yourself?  

Here’s another question: Do you want to figure this all out on your own? Or do you want to partner with a team of church financial experts to help you manage your church finances and plan for the days ahead?  

Our done-for-you payroll, bookkeeping and online giving services will take the financial burden off your shoulders and give you peace of mind. If you’re not confident in your numbers or you’re wasting valuable time trying to figure it all out, schedule you free consultation call today.  

Because this is also true: Taking time to make wise strategic and financial decisions now will help you navigate the days, weeks and months to come.  

Can a Church Show a Profit?

It’s the end of the year. You sent out an end-of-year giving letter and your congregation responded. 

Suddenly you have more money than you anticipated having. But then you worry: 

  • Is this a bad thing to have excess funds at the end of the year?  
  • Do I need to run out and spend it immediately? 
  • What should I do with this money? 
  • Will we lose our nonprofit status? 

You can breathe a sigh of relief. You’re not about to lose your status.  

There are four big questions that churches frequently ask about end-of-year finances. What most churches want to know is: 

  • Can we have a surplus of money at the end of the year? 
  • Should we aim to have a surplus at the end of the year? 
  • How much of a surplus should we aim for? 
  • What should we do with that surplus? 

When we say surplus, what we’re really talking about is the amount of money a church has after all donations and income have been accounted for, and after all expenses have been subtracted. In accounting terms, this is either a “profit” or a “loss.” 

Terminology is important here, since churches are not-for-profit organizations. As a not-for-profit, there are strict legal guidelines and laws that must be followed. Therefore, we need to be careful with the term “profit.” In this case, the more accurate term would be “net proceeds.” 

Let’s address each of these questions in order. 

Q1. Is it okay to have a surplus of money at the end of the year? 

The short answer is yes. Just because you’re a church doesn’t necessarily mean you can’t show a “profit” at the end of the year. 

A nonprofit can make a profit.  

But there are limits to what you can do with that profit. 

Your not-for-profit status impacts what you can do with the money that is left over. It ultimately it comes down to the purpose of your organization. 

A traditional for-profit organization makes money for its owners or shareholders. Profit is usually distributed to shareholders or put back into the business. 

On the other hand, a not-for-profit must have a “public or charitable” purpose. This means any end-of-year surplus should be used for a public or charitable purpose. 

What does this mean for you? As a church, you cannot distribute that money in any way to shareholders, investors or other people that may have a stake in the church.  

Pro tip: Just don’t give that money to individuals in any way at the end of the year. 

Q2. Should we plan to have money left over at the end of the year? 

You should absolutely have money in the bank at the end of the year. That is simply being a good steward of the resources God has given your church. Plus, it just makes smart financial sense.  

You want a financial cushion to prepare for the unexpected. This could be an unexpected expense, a downturn in giving or simply an unexpected opportunity. 

Q3. How much should a church plan to have left over after all expenses have been paid?

 The quick answer is it depends. 

There is no one-size-fits-all answer to this question. We’ve seen churches approach this question in a variety of ways. 

Some organizations take a very conservative budgeting approach. They intentionally plan to spend less than they anticipate they will receive in a given year.  

Other organizations budget based on what they received in the previous year. They then take whatever excess they receive from growth and allocate that money at the end of the year. 

Still others plan for an end-of-year giving campaign that they hope will bring the organization surplus at the end of the year. 

 I’ll give some more thoughts on this in a moment, but first, let’s discuss the last question. 

Q4. What should we do with this money? 

The answer to this question is also, it depends. Some churches allocate this surplus for specific needs within the church, some use it to establish savings and some use it to fund future ministry growth.   

Our advice is to strike a balance between savings and ministry. It’s always a good idea to save for a rainy day. In church life, you never know what the next week, month or even what tomorrow may bring. It’s fiscally responsible to have some margin in your accounts that allows for flexibility and financial security in the organization. 

It’s also good stewardship, however, to be able to distribute those funds to missions, local ministries or other ministry needs of the church. Does your church need some new equipment that perhaps you’ve been putting off? Does your facility need updates or improvements? Are you able to bring on some staff support or outsource some work that is causing you additional stress? 

However you choose to allocate these funds, the bigger point is that having a surplus at year end puts your church in a position where these decisions can be made. It gives you options. 

Let’s return for a moment to the previous question of how much to put aside. 

While it’s true that the exact amount depends on the circumstances of your church, there are a few principles that can guide us in this discussion. 

We’d contend that having too much left over at the end of the year means that you didn’t fully invest into your full ministry potential. Ultimately it comes back to the foundation of stewardship. We are called as churches to be wise stewards of the resources that God has entrusted to us.   

Stewardship involves both saving and investing. Good stewardship means that we’re using the resources to expand the mission of our church. It also means that we’re not putting our organization in a financially untenable position.  

If you want to learn more about how you can better steward of the resources God has provided your church, or you simply want to gain a better understanding of how to effectively manage church finances, sign up to receive free church finance, administration and growth tips delivered right to your inbox.  

If you’re ready to take the next step of taking the burden of managing your church finances off your plate, then let’s schedule a time to chat! We’ll show you how having a done-for-you financial management and accounting solution can help you and your church thrive! 

Four Dangers of Designated Giving

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If you’ve been around church long enough you’ve for sure heard about designated giving. Like many things it is one of those areas where hear-say and old stories have skewed how and why churches have designated gifts.  If we’re not careful, we can run into many of the dangers of designated giving and it will distract us from our main mission, reaching the lost.

Similarly, many churches that have been around for any amount of time over a few years may have designated gifts that no one currently really knows what they are for.

While the IRS make it pretty clear how not for profits should handle designated gifts, and they also provide info on the types of designations gifts can have, we’ll focus more on the dangers designated giving can have for your church.

Now, before I get run out of town, there are some instances where designated giving is acceptable. After we talk about the dangers, we can discuss where it may be appropriate.

Designated Giving Danger #1

Your church can be designated broke!

There are types of designations that donors can place on their funds, but one thing remains the same, if the donor has designated their gift, it CANNOT be used for anything else.

You can see the danger here, if a donor designates money towards something; let’s say, flowers for the pulpit, and you have no desire to put flowers on the pulpit, then you’re kind of out of luck with that bank balance.

We have churches that have been around for a long time that have old designated funds where they’re not really sure what the original intent of the fund was. In some cases, the donors and people who set it up are either gone from the church or deceased, so there’s really no way to find out. In any case, that money is tied up by designation.

The only way to get designated money undesignated is by approval of the donor.

Designated Giving Danger #2

Your church is setup for ministry silos

Designated giving is also a killer of church unity.

When people are able to designate their giving, it opens the door for people to dictate their ideas through their giving.

Let’s say pastor that someone in the church gets upset with something you said or a way you handled a certain situation. It wasn’t bad enough for them to leave the church, but just out of spite, they’re going to show their dissatisfaction by donating their tithes now to the youth department.

While in some ways that may not seem bad, heck, the youth need money too, it still reveals a huge issue with church health.

If people can dictate through their giving, it’s a sign of an unhealthy church.

Designated Giving Danger #3

It can distract from your mission

As humans, it’s easy for us to get distracted by the shiny object syndrome.

In churches, the same thing occurs. We start with a defined mission and vision with a clear pathway. Over time, as things grow, more people get involved and we get busier that vision and path can get blurry and distracted.

Now throw new leaders into the mix that get going. Even the strongest leaders pointing the organization in the right direction can have trouble keeping everyone on the same path. As things keep moving along, distractions happen and side roads creep in.

Sometimes, these side roads seem harmless, just a short-term project but if not handled correctly these will distract from the main goal. Over time, these small distractions become bigger and cause confusion and lack of clarity for the organization.

How does designated giving relate here?

Simple, let’s say one of your leaders comes to you with a need in your community. At first that sounds great and probably something we should do. At first, it’s going great and as intended. However, over time, if not kept in check this little side project can get legs of its own and overwhelm your main mission and vision.

Designated Giving Danger #4

It creates unnecessary accounting complexity

This one may seem weird to say as a Church Bookkeeping and Accounting company but its reality. Designated giving sets your church up for undo complexity in your accounting. This also relates back to the previous point as the complexity increases, you can get distracted from your mission.

Churches really have two ways to manage designated funds, and both are fine to do. Some will keep the funds in one bank account and just account for the differences in their software while others create a completely separate bank account to keep the funds distinguished.

Either way is completely acceptable, but both have their inherent dangers.

The first is dangerous because if you have people doing Bank Balance Accounting, they may see the balance of the account and think the church is financially healthy. What they may not realize is that some of that money is tied up for a specific purpose (designation).

The second gets dangerous because now you are adding bank transfers into the mix. Money gets counted and deposited into one account and transferred, or it can get deposited into each. Either way, it gets more complex depending on your method for retrieving that money out of the account(s) to be used.

Here’s the reality.

Our mission is to reach our communities with the good news of Jesus. When we add complexity to secondary issues, it takes away bandwidth to focus on our primary mission.

As an outsourced church bookkeeping company, we’re happy to help manage designated funds, and be that partner, but we’ll also consult about these dangers. Personally, I have not found a reason making designated funds worth the hassle.

Here are a couple solutions for avoiding these dangers of designated giving.

The first will take some courage. The next time someone wants to give with a designation, kindly tell them that the church has a policy of not accepting designated gifts, but they are more than welcome to give to the general offering.

In many cases, you’ll find the donor has no issues with that. Sometimes, they’re giving to designated areas just because that’s what they’ve always done and no one has said anything different.

Secondly, adopt a Kingdom Funding Approach to your church’s budget.

In a Kingdom Funding Approach, you’re in many ways accomplishing the same things as you could with designated giving, but doing so in a healthy manner through good budgeting stewardship.

In KFA, you handle any designations through the budget process. If you want to start a building project, setup a line in your budget for that. If you want to give to missions, put it in the budget as either a percentage or set amount. If the church needs new windows or roof repair, you see where I’m going.

If your budget has proper allocations and is managed correctly, there will be no need for designated funds.

Designated funds are a big issue in many churches and getting away from them will not be an overnight process, especially in an established congregation that has become accustomed to them. However, your ministry will thrive by removing these dangers and unnecessary complexities.

How To Handle Pastor Appreciation Gifts

The IRS and pastor appreciation gifts

When I first felt the calling to ministry, I actually had a pastor who did his best to talk me out of it. He shared his experiences with isolation, long hours and times when he wanted to give up.

At first I was shocked. Why is this man who is serving the Lord trying to talk me out of being a pastor?

Why is this man who is serving the Lord trying to talk me out of being a pastor?

I quickly realized he wasn’t really trying to talk me out of it, but testing my calling and really forcing me to wrestle and pray through the decision of going into full time ministry.

I took the plunge and haven’t looked back. Now I don’t serve in a traditional capacity as a pastor, preaching and leading a church each weekend, but rather a role supporting pastors and freeing them up to be better focused on what they do best … Ministry.

Your pastor probably shares a similar experience. He may be all smiles and joy on Sunday morning, but truth be told, there is a war waging inside of him.

He’s not showing the late night he spent last week when he was called to the hospital in the middle of the night.

He’s not showing the hurtful words that a member shared with him about how he’s handling the church.

He’s not showing the stress put on him by the finance team giving him direction, but not providing him any input to the matter.

He’s not showing the stress from home as his wife and children realize they often take a second seat to his role as pastor.

These are the things most people don’t realize your pastor is dealing with.

Now that I’ve painted a bleak picture of being a pastor, let me also share that your pastor is probably in the most rewarding position he could be in. While there are times of stress, the position is often the most rewarding and delightful place to be, fully serving God.

So why did I share all those things about your pastor?

Your pastor needs your appreciation.

Most pastors aren’t in their positions for the money or fame. Many could go get secular jobs and not put up with the hassle they often deal with. Your pastor does it for a higher calling.

However, your pastor would still like to be appreciated.

Every year, October is pastor appreciation month a time when most churches are going to provide a pastor appreciation gift. I’ll admit we shouldn’t reserve our appreciation and show only one month, but it’s nice to have a defined time to remind us of what our pastors do for us.

In appreciating your pastor, there are some things to keep in mind that we’ll discuss here. While most people have great intentions in how they show appreciation, there are definitely some guidelines to stay within so you can truly bless him.

Pastor Appreciation Gift Guidelines

For many churches, they want to bless their pastor with a cash gift to show their appreciation. While that is great, here are a few things to keep in mind.

Cash gifts for pastor appreciation are probably taxable income

It’s pretty safe to say that anytime an employer (the church in this case) provides cash or a non-reimbursable payment to the employee (pastor) it is probably taxable income to the receiver. There really are no instances where an employer can provide payment to an employee and have that not taxed.

As a church, maintaining your financial records is crucial on so many levels. Any check or money that is spent needs to be tracked. When that payment is given to an individual in a non-reimbursable payment, it needs to be recorded and handled correctly.

If you are paying pastors straight cash with no record, you’re inviting a whole host of problems should an audit ever occur. There is never a time when someone should be given cash from the church. This also goes for love offerings that are collected. At no time should any part of a collected amount of money be given in cash to an individual.

Church collections for pastor appreciation gifts may not be a tax-deductible donation

Churches often survive on faithful gifts and offerings.

It’s often misunderstood, but in most cases the donor can claim donations to a church as a charitable donation and have that reduce their yearly tax burden. However, in instances where money is given and designated by the donor as to the use of those funds, it opens an entirely new set of circumstances for that donation which may preclude the amount from being deductible.

The IRS has made it fairly clear as to when a donation is deductible or not. The test really goes back to donor intent.

The test here really goes to how much control the organization maintains as to the use of the funds. If the donor gave a gift and “designated” that gift to a specific individual, that gift would not be tax deductible. Those gifts are being treated, in effect, as a gift to the individual.

If the person gave the gift to an organization to a designation where the church maintains control as to the disbursement of that gift, it can be tax deductible.

Here are a few specifics.

If money is collected for the Senior Pastor, and people are giving specifically for that purpose, those monies are probably not tax-deductible.
Here’s a good article to help understand giving designated for an individual in your church.

If there is more than one pastor on staff, and people are giving money to a pot of money that will be distributed by the church among the pastoral staff, that would be a deductible gift.

In both cases, when the money is disbursed to the pastor(s), it would be considered taxable income to them and would need to have appropriate amounts withheld.

What if our pastor is paid as a 1099 Independent Contractor?

This presents a completely different scenario and the church really needs to take a look at the IRS test page as to whether the pastor really qualifies to receive a 1099-Misc. Additionally, for the pastor, he is being over-taxed handling things this way if that is his choice on how to receive compensation.

Are non-cash pastor appreciation gifts to the pastor taxable

Many churches will choose to give gift cards or other non-cash gifts as pastor appreciation gifts.

In this case, the IRS terms those gifts at “De Minimis Fringe Benefits” defined considering its value and frequency are so small that accounting for it would be impractical or unreasonable.  IRS page on De Minimis gifts for churches

Two keys here to keep in mind are that these gifts are not to be a way to disguise compensation, they are to be occasional or unusual in frequency and as already ruled by the IRS, should not exceed $100.

However, gift cards cannot be classified as de minimis gifts for the very fact that they have a specific cash value. Because they have a specific value which can be accounted for, any Gift Card pastor appreciation gift would need to be considered a taxable fringe benefit to the pastor. A case could be made for the small monetary value of a Gift Card falling under the guidelines as “impractical or unreasonable” for accounting purposes, but again, since they do have a very specified cash equivalent value, they would be a taxable gift to the individual.

Because they have a specific value which can be accounted for, any Gift Card pastor appreciation gift would need to be considered a taxable fringe benefit to the pastor.

You should appreciate your pastor regardless

Being a pastor is a difficult position and we should always take time to show our appreciation. He’ll definitely appreciate it.

Note: Because your situation may be fact dependent, this is not to be considered tax or legal advice. The intent of this advice is to be general in nature and should not be used as legal advice. Your church should consult a qualified individual with the specific facts of your situation.

The Procrastinating Pastors Guide to Annual Church Budget Planning

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We published last week the 3 Reasons Your Church Needs an Annual Budget and had some good responses from pastors that agreed, but wondered what were those next steps to getting their annual budget planned.

Today, we’ll give you 6 steps to Annual Church Budget Planning started. From these simple steps, you’ll have most of the framework in place to have an Annual Church Budget you can use for your ministry.

Step 1 – Review Last Year’s Church Budget

One of the best indicators of how you are spending and allocating your spending for your ministry is to look back at the historical patterns. Review this past year as a Profit and Loss statement. It will show you what you took in (income) and what you spent (expenses).

Look for any patterns. Also, look for any areas that have bigger numbers. When you look at yearly spending as a whole, over the entire period of time, you may get some surprises that you didn’t expect once things are put into perspective. Often, we’ll have churches that don’t realize what seemed like a small amount they were spending weekly, when added up over the year actually becomes a bigger percentage of budget than they expected.

Use these findings to decide if there are areas you need to focus or re-think how you’re allocating funds.
“Be honest here. If you’re spending $100 a week on donuts, and throwing out 2-3 dozen every week, it may be time to analyze or help your donut buyer plan better!”

Step 2 – Project your church year end financial

Ok, now we’re going to get into the nitty gritty of planning.

Since we’re not quite complete with the year, we’ll need to do some projecting of how things will end. The good news is if you’re reading this post in late November when it is published, we only have a few weeks left of the year so the projection will not be too hard. However, since you may be reading this at another time, we’ll show you a quick way to project.

Take your YTD Profit and Loss report for your church. This should show you what has been recorded as income and expenses so far this year. If you’re using Quickbooks, or hopefully our Simplify Church Bookkeeping System, this report will be pretty easy to produce.

If you can, export that report to Excel.

Once you have it in Excel, create a formula as follows =SUM (Col # / # of months in report) * 12. It will end up looking something like this: = SUM(B2/11) * 12

On the cell with your formula, grab the little square at the bottom right of the cell. Click and hold as you pull down so that you are highlighting all the way to the last row of the report. This is a quick way to duplicate the Excel formula you just made for all the rows.

What did we just produce?

This new column will be your End of Year projection on how you will finish the year. From this information, you can now start to project your Church Budget for the new year.

Step 3 – Analyze Year End and Plan the New Year

This is where the real planning begins.

Use the information you just produced and begin to think through your next year. I would re-color or highlight any numbers that are going to stay the same in the next year. This may be things like Rent, Subscriptions, Fees and other expenses that you are committed to or are vital to your ministry that you already know you will use in the next year.

PRO TIP : Add numbers into a third column in Excel so you have:
Column 1 – Real numbers produced from your Church Accounting Software
Column 2 – Projection from the equation you created in Step 2
Column 3 – Numbers we’ll enter as we create the next year’s Annual Church Budget

As you review line by line, think about those expenses that made up the numbers. Do they seem high? How does that line contribute to your ministry? Does that expense help you fulfill the Mission and Vision for your church?

Think through the spending of each line with those questions as a filter and use that to analyze what you’ve done so far.

As you complete your review, use Column 3 to put your final numbers for the next year’s church budget.

Step 4 – Get input from your ministry leadership team and key ministry leaders

Once you have a draft of the budget, which should be completed now in Column 3, share it with your ministry leaders. Get their input and thoughts.

If you have a staff, this is a good time to get their input into their ministry area and their plans for the new year. If we had more time, or had started this sooner, we could have had them draft their ministry area and then plan accordingly. Since we’re at crunch time, we can give each leader a primer for their decisions, and let them have input into the process.

Have a discussion with each leader about their area. Ask the same questions you considered in your preparation for the spending in their ministry area. The key here is to accept their input and get “buy in” from them. Let them feel a part of the process and understand why we have a budget, and how important good financial stewardship is to the success of the ministry.

If there are any adjustments that come up here in those discussions, adjust your budget at this point so you have a good, prepared final draft to present for approval.

Step 5 – Begin the preparations necessary to finalize and approve your annual church budget

If your church by-laws or constitution requires it, this is a good time to start scheduling whatever meeting is going to be appropriate for a vote on accepting this as the budget for your ministry.

It may also be required that a draft of the budget is required to have out for review to your membership as well. Get this information out soon as well so that people can be well informed. Having a well-planned and thoughtful budgeting process can help to alleviate some of the unnecessary headaches and drama that so often plagues ministries in this process.

Step 6 – Review the Church Budget Monthly and Quarterly in the New Year

Now that we’ve spent the time to prepare the budget, let’s really put on ministry on fire and use that planning throughout the year.

Each month or at least each quarter, do a review of your income and expenses against your budget.

PRO TIP: Simplify Church Bookkeeping clients get this report each month for a quick and easy review!

As you move throughout the new year, you will now have a financial road map for your church. You will find ministry decisions become easier (from a financial standpoint anyway) as you are able to look at things and plan against you expected annual church budget.

Hopefully you get a chance to start your budgeting process now. I’ve been in your shoes before and know as a pastor you wear many hats. If you’re like most, those hats that seem daunting, or you’re not exactly sure how to complete are the ones that get put on the back burner.

The steps I laid out here can be completed in just an hour or so. The analysis part make take a bit longer but it will only take a short time to get there. If you need some help, advice on your budget or want to get this off your plate completely by using our Simplify Church Bookkeeping System, Schedule a demo today.

Hey! We’re offering a webinar on Wednesday December 7, 2016 where we will go through these steps and I’ll show you exactly the steps I go through to create church budgets. If you’re interested, Register Here!

3 Reasons Your Church Needs an Annual Church Budget

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It’s that time of year again when it’s time to start planning and finalizing your budget for the upcoming year. (assuming you’re on a Jan-Dec Fiscal year)

Fundamentally, your budget is nothing more than a spending guide. A roadmap, so to speak, on how you will allocate your spending for the upcoming ministry year. For ministries, your budget is one more tool you can use to quantify your ministry effectiveness. This is not a post about numbers, as some get all antsy when people start talking about ministry and numbers, but we must have some areas of ministry we can track. If you can measure it, we can track it.

So where do we start?

I am amazed by how many churches come to us with no budget. I guess the same can be said for many households that don’t adhere to a budget as well. (I’ll admit I’m not the best at tracking household expenses to a budget as well)

A comprehensive budget is crucial for your ministry.

Here are three reasons why your church needs a budget for the next step of growth.

1. A Budget Will Make Ministry Decisions Easier

We’ve all been there in ministry. A new opportunity comes up, someone brings up and idea, or an unexpected expense comes out of no-where. All three have a unique set of responses and decisions that need to be made. As you’re probably well aware, ministry can cost money. In many cases, churches have to do more with less.

Ministries are organic and in turn, always growing … Hopefully.

In that growth, there are always new opportunities and ideas that present themselves. Many times, these opportunities come with a cost.

Here’s what a church budget does:

– It answers questions about the mission and vision of your church.

– It sets clear direction on where the money will be spent and where the priorities of the church reside.

– It provides a filter for making spending decisions that may come up throughout the year.

– It provides a measure and benchmark to track the financial health of the organization

– It sets a standard to reflect and review throughout the year to make future ministry decisions.

2. A Budget will Give Donors Trust In Giving

Let’s face it. Churches are completely dependent on the faithfulness of donors.

Unfortunately, not everyone will be faithful to what God has directed about giving. While that fact opens up great doors for ministry discussions to happen, it still doesn’t put money in the bank. Further, money is one of those areas that people don’t want to talk about, don’t want to discuss and especially in churches, its almost a taboo subject.

We’re not here for a discussion on Biblical Stewardship, but we can talk about positioning your church and ministry to reduce the number of excuses people can have.

We’ll already concede that many people are just flat out being unfaithful with their lack of giving to their church. That being said, we can move on to the secondary objections that people have for church donations.

One of those objections, whether voiced or not, is that the donor doesn’t trust the way money will be managed within the church. Just ask around to people that have been in church life long enough and ask about check approvals in business meetings. #SMH.

Trust is another big issue that we’ve written about in the blog post about church giving There’s Freedom in Trust so read that, I’ll save the room here.

Having a specified budget in place will help donors know how their money will be used. It gives the giver confidence that the money they are giving will be used wisely.

I was mentored early on in ministry by my pastor who made sure to emphasize with me the regard he holds for the resources given to the church. He stressed that I remember that the money we were given was often a sacrifice for the individual who gave. We should treat every dollar in much the same way. We are making light of their sacrifice when we don’t regard every spending decision with that thought.

We should treat every dollar spent remembering that the donor sacrificed to provide that resource to the church.

Having a budget in place, that can be shared with donors, is a security blanket so they can know their money will be used with wise stewardship decisions. When people have trust that their money will be used wisely, they will be more inclined to give above and beyond and be excited about giving.

3. A Budget Provides Direction for your Ministry

Ministry often moves fast.

If you’re like most growing churches, things will look different next month than they do now and most certainly, next quarter they will look different.

In a growing church, there are things that will come up throughout the year that will change what you’re doing in ministry. Being aware and cognizant of those changes is key to leading your church through that growth.

So how does that relate to your budget?

Your budget is a living document that allows you to make decisions throughout the year.

Think of it as the proverbial road map.

As you are navigating through the inevitable changes of a growing church, the budget becomes a guiding document (from a financial standpoint) for your to make decisions and see how the church may be affected financially. Now there are many other things that can play into that, but having a budget is a great way of knowing where you stand at any point in the year against your plan.

At any time in the year, you should be within 30 days of knowing where you stand actual vs. budget. If this is not a report you’re seeing currently, Contact Us and let us show you how you can get that report in an ongoing basis.

Your Church Budget is CRUCIAL to ministry

As you can see, having a budget in place for your church is crucial. In the many pastors we talk to all around the country we find this is often an overlooked area in ministry. If you’re having trouble putting together a budget, or if you want to know that you’re using the best practices to put together your budget, let us know and we’ll provide some resources and help for you.

5 Church Financial Reports and Metrics Every Pastor Needs Regularly

five financial metrics every pastor needs to know

Pastors and Church finances are one of those issues that can spark debates in churches. A myth has grown in our church that the pastor should not do anything with the church finances. While I’ll agree, the pastor should be at arms length between the actual handling of the finances, he still needs to be very much aware of what’s going on. One way to know the health of the church is to watch for giving and spending trends in the church.

At the very least, every pastor should view and analyze these 5 Church Financial Reports on a regular basis.

1. Church Statement of Accounts/ Profit & Loss

The most fundamental report a pastor should be taking a look at monthly. At a fundamental level, this provides insight into how much was money was deposited in the previous month, and portrays that against how much money was spent. Those totals are subtracted to get either a positive or negative number. Read this post if you’re curious about if a church can have net income.

“Don’t fret initially at the bottom line number. It is not an exact reflection of cash flow as deposits and expenses may be outside the date range. The bottom line of this report should be considered over a longer term to get real insight into trends that may be developing”

This report should be reviewed in month’s comparison so you can see trending spending by budget line. This will give you some insight into where your money is being allocated. You can also balance a level of detail between parent budget lines and child budget lines. (I don’t mean adult and children ministries here).

What I mean is the parent budget line of Children’s Ministry may tell you enough or you might want more insight and dive into the child line of that budget to see how much you spent on Cookies for Preschoolers out of that budget line. There is a definite balance on the level of detail you should be watching.

2. Church Budget Comparison

This is probably the most important report to consider as a pastor.

If you don’t have a budget (a plan) on how to use the monetary resources of your church, you have no way to make proper spending decisions. For Church Plants and churches with limited income, a budget is CRUCIAL!

While this report is very important, we need to have a quick understanding of what your budget actually is. Many churches put too much weight on the budget, or think that it is some sort of a legally binding document. While your Constitution or By-Laws may require you to operate on a budget, that budget in itself is merely a guide or spending plan. It details what you will spend and how you will use the church resources to fulfill your mission and vision

A Budget Comparison report will help you to analyze spending actual vs. planned.

You can look at this report on a monthly basis or create for longer periods of time. Both ways will give you insight into how money is being spent in actuality verse what you may have expected or planned.

Many churches and pastors cringe at the idea of having to prepare and develop a budget. In most cases, the hesitancy is more over not exactly knowing how to prepare the budget instead of it really being a big deal.

“We will be launching a Budget Building System in August 2016, click here if you want to be one of the first to know when it releases”

Properly managing you spending against your budget will help you to analyze and be sure you’re spending money exactly where you planned. Regardless of your budget analysis, you should take these ideas into account when preparing your church budget. For ideas about church budgeting on faith, spending on reason, click here for our post on that.

3. Church Giving Trend

While many don’t like to talk about it, money in the church is often a very crucial aspect to ministry.

For many pastors, the idea of managing money makes their eyes glaze over. For others, they have fallen victim to the myth that a pastor should not know about the church finances (blog link here).

Now we could make an argument that there is a level of separation the pastor needs between the finances and himself, in most cases, the senior pastor will be the one held liable or have the perceived blame for financial problems in the church.

As a pastor, you should know your giving trends. You need to have an idea of the amount of average weekly deposit, your monthly average income and the trend for the quarter. You should also track this each quarter through the year so you can find the trends and also lulls in giving months. Remember, summer is always a down giving time so knowing the actual numbers will help you prepare for the summer giving lull. If you’ve been around long enough, track those numbers by comparison to previous years. That way, you’ll see if you’re on a growth or decline trend in your giving.

4. Giving per unit metric

This is a metric that gets tossed around a lot, and there are quite a few different opinions on specifics but we’ll dive into a few strategies here. We’ll discuss real quick how to use this number, not necessarily any goals or benchmarks that you should have. In many cases, this is a planning and review measurement.

Take your total giving each week and divide that by the number of giving units. You can define giving unit on your own, but in most cases this is (total attendance – children / 2 (accounting for husband & wife together)) You can decide on your own measure here, just be sure you’re consistent so you can get accurate trends.

How to analyze?

This metric will help you make budgeting and spending decisions. It will also give you an idea of the generosity health of your congregation. When you know the giving per unit, you can then use that to forecast budget needs as your attendance grows.

$40 per unit * 100 people means you should expect $4,000 per week income or $208,000 per year. This will help you start your budgeting planning on income expectations.

Once you have the benchmark, if you watch that number month over month, you can get a pulse of giving in your congregation.

From our research, a health church average per unit amount is in the $40 range.

There are a ton of variables that could affect this number (newer believers, seasonality, angry members :), etc.) It’s not a hard fast measure but simply a measure to keep you in the know.

5. Individual Giving Changes

OK. I’ll say it. A pastor SHOULD know what individuals give in the church.

Now before you tar and feather me and call me a heretic, hear me out.

Giving is a spiritual discipline. As a person’s pastor, accountable for their spiritual development, how can you speak into a person’s life or hold them spiritually accountable if you don’t know the value of giving in their lives?

Now, you probably don’t need to collect a W-2 and do the math to determine if they are giving exactly 10%, In acutality that would be really creepy!

You probably don’t even need to know the actual number but you should know whether or not they are a giver. You can even know whether or not they fall into the average number of giving per unit.

If you don’t feel comfortable knowing the numbers, or even if they are a giver, have someone who does know get you a report of anyone whose giving has changed 15% in either direction in the previous quarter or 6 months. This will give you a good indication of a life change.

A word of advice. You should absolutely know whether or not your staff and key leaders are givers. Your key leaders and staff need to be stakeholders in the ministry.

BONUS!

Here’s a bonus report you should follow that isn’t necessarily a financial report, but will play a vital part in many of your decisions.

You need to follow an attendance report. We hear all the time that pastor’s shouldn’t be concerned about numbers and that is completely bogus. If you don’t have numbers to measure, you are relying on feelings and assumptions to make decisions and that is not a good way to do things.

Keep track of your average weekly attendance. Track numbers of volunteers each week as well. Also, track that in a monthly average so you can keep an eye on trends.

If you haven’t figured out yet, a key part of managing your church is watching for trends. Over time, trends in income, expenses, giving and attendance will develop for your church. Knowing these trends will help you better manage your ministry, lead your team and shepherd the church toward spiritual growth.

If you want to know more about how many of these reports can be developed for you without burdening a volunteer or taking your valuable time, get in touch with us and we’ll show you how our Church Bookkeeping System can help you better track and manage your church.

Budget on Faith, Spend on Reason

Budget on faith, spend on reason

For many churches, we are coming into the season when it is time to start planning for the upcoming year. That planning includes setting a budget on how to allocate the resources God has provided the church.

No church should be operating without a budget. Even churches that think they are too small or don’t have enough income should still have a budget. Actually, some of the smallest churches should budget more as money is scarce, and it’ll provide key analysis for requesting assistance should that be necessary.

A trend we have found in most churches is that the budget is handled in a faithless manner. We preach about faith, tell the folks in the pews to live by faith, and have every assurance that God will provide to those who are faithful. Yet, we budget on reality without allowing God to intervene.

The budget is looked at from last years numbers, adding in a percentage for inflation or cost of living increases, but nothing more added for God to move in the upcoming year, almost as if God’s provision is an afterthought or unplanned expectation.

Now I can definitely understand being frugal and the need to be practical in our planning. However, what are we saying about God’s faithfulness by not raising or exceeding our expectations

Let’s try something new for the upcoming budget year. Let’s try budgeting with faith that God will provide for something extraordinary. Let’s budget with the same level of faith we are preaching from the pulpit.

Secondly, when you have your faith budget in place, spend your budget line items on reason. Plan to spend your budget lines at 80%. Spend reasonably the money that needs to be spent, but nothing more. I think you’ll be amazed at how God will provide for your church when you don’t limit God.

By spending on reason, (what you have available now) and being frugal in spending, you will be able to better maintain cash flow.

Your congregation will also be more inclined to give to a larger budget. Now getting people to understand and be faithful givers is a whole other topic, but if done correctly, a faithful budget goal will spur your congregation to have faith in giving.

<strong>When was the last time you had a faith increase in your annual budget?</strong>