Poor financial stewardship will keep you from fulfilling your ministry’s mission.
When it comes to financial stewardship, many churches fall behind their for-profit counterparts. This stunts their growth and sends them down a dangerous road.
This is not about money.
Rather, it’s about being a good manager and doing the right thing every time.
Of course, most churches are not intentionally mishandling their finances.
They simply make decisions with poor data and have outdated methods.
We’ll touch on common mistakes, misconceptions and pitfalls churches fall victim to.
We’ll also cover what transformational financial stewardship looks like.
Biggest Church Financial Management Mistakes
These are the most common mistakes and misconceptions churches make. They lead down a path toward poor financial stewardship.
Mistake #1: Not having proper controls in place.
Far too often, churches trust one person with little or no bookkeeping experience.
This person also may be handling far too much, such as signing checks and posting the deposits. This can be a crippling process for a church.
Mistake #2: Trusting church bookkeeping to a layperson.
Many times, we see this done because the church finds someone who may have some QuickBooks experience, but doesn’t have the expertise to know if that person is doing a good job.
As long as this person can produce a financial statement that’s halfway reasonable, no one checks on them.
This creates a situation where a ticking time bomb goes off somewhere down the road.
Churches see this as too expensive and think outsourced accounting is not important.
It is a mistake to look only within the congregation, rather than for a virtual company with a church focus.
(This is where SBS Accounting & Advisors can really help!)
Mistake #3: Not having a cloud-based accounts payable process.
As mentioned before, having the proper controls in place and using the cloud is so important for churches. Yet both are rarely practiced.
Churches may have a two-signature policy. This just means they’re now trading a piece of paper around the church.
(This is an area where SBS can help.)
With our web-based app, you can have approval processes where multiple people can approve in the cloud, no matter where they are, on their smartphone, for example. Additionally, vendors can get paid electronically or by check.
It streamlines the whole process.
Mistake #4: Not paying the pastor/staff correctly.
There are special rules on how to pay pastors and staff whose comp includes a housing allowance.
This is a common mistake due to lack of knowledge, but can be a costly one.
Mistake #5: Not getting quotes for services.
Churches sometimes go with a friend or someone’s relative, or stick with the person they’ve always had. In this case, they tend to overpay for services because they don’t get multiple quotes.
If you can relate to some of these common mistakes, that’s understandable. Some of our clients have felt the exact same way before working with us to find solutions to their church needs.
Now, let’s get constructive.
Here are 3 Rules to Better Church Bookkeeping
1. Track your contributions correctly.
Some churches name funds to particular purposes, but they don’t track the life of those funds. In other words, they aren’t properly separated from general funds.
Bottom line: This can lead to cash flow and compliance issues. So make sure you keep contributions separate and account for them appropriately.
2. Move to the cloud.
Many churches are using QuickBooks Desktop on a church member’s laptop. Some may also still print checks and pass them around to get a pastor signature.
They also enter expense reports and print out a piece of paper to staple 10+ receipts to. We even come across the occasional punch card system to track time.
This old school approach is a giant time waster. It also poses a major security issue if the paper falls into the wrong hands.
By going paperless you can have all bills, receipts, financial reporting, and general ledger stored in the cloud.
This gives 24/7 access to your financial picture.
It’ll also help your bookkeeper uncover the best course of action to move forward.
And you can run your church from remote locations – a must during a pandemic or any local natural disaster.
This can make you disaster proof.
3. Provide 1099s.
It is very common that churches fall short on making sure they 1099 everyone who works for their church.
Some churches have a mentality that because we’re a church, we don’t have to do these things.
No matter how you rationalize it, this is very risky if you get audited.
It’s wrong from a tax perspective and presents a major compliance issue.
You have to comply at every level with the IRS.
If you can relate to any of the common mistakes and misconceptions in the article, we can help.
We work with churches all over the country.
We’re also particular about the churches we work with because we want to be aligned with the same, important mission you have.