For-Profit vs. Church Financial Management

The head of the Evangelical Council for Financial Accountability shares the differences to help people transition from the business world into a nonprofit ministry.

Dan Busby serves as president of the Evangelical Council for Financial Accountability. Busby recently spoke with Church Finance Today on best practices for financial professionals who transition from the for-profit business world into a church setting.

What unrealistic expectations do for-profit financial/business folks bring into the church setting?

The most unrealistic expectation might be that there isn’t much different from the for-profit world and the church world. That’s a significantly improper view when coming from the for-profit world to the church world.
That kind of view might increase the time to properly transition from the one culture to the other.

What else might catch people off guard?

Often there’s a transition in staffing when coming out of the business world. Businesses of significant size, in my experience, are often adequately staffed, but the staffing in many churches is more limited and sometimes dependent on volunteers. So it’s a very different situation in the church world. [There’s] the problem of being asked to cover more different roles, and [church employees] are stretched time wise more than they are in many business settings.

And then there’s the possibility of a significant transition in compensation. Moving from business to church often results in a significant pay decrease and perhaps reduction in fringe benefits.

What should treasurers/financial managers do when they encounter what seems to be sloppy or loose financial management in the church?

We’re talking about God’s resources that individuals and others give to the church to be used for kingdom purposes, and that would be a difference between the for-profit world and the church world. So the fact that we’re dealing with kingdom resources in the church world would require us to step up to a higher level of integrity with respect to how those funds are handled.

What mistakes do treasurers often make when they move from a for-profit business to a church?

The difference between for-profit and nonprofit accounting principles is significant. They are moving from—in the for-profit world—one bottom line to several bottom lines in the church world because we may be dealing with several classes of net assets.

And additionally, in the church world, one of the accounting nuances that can be challenging for somebody from the for-profit world to understand is the releases of temporarily restricted revenues. Reporting the related expenses of unrestricted is a challenging new concept when coming from the business world. There just really isn’t anything like that in accounting in the business world.

In the business world, accounting is focused on how well we are doing reaching our bottom line. But in the church world, we’re more focused on meeting budget projections in terms of revenue and expense.

You mentioned dealing with several classes of net assets when moving to the church environment. Please explain.

The operating dollars in the church world are in unrestricted net assets, but when a donor has temporarily restricted some funds that can be used for a certain purpose, those would be temporarily restricted net assets. And in a few cases, a donor might permanently restrict a gift, and those would fall in the permanently restricted net asset class. And so there are three classes of net assets that the church financial administrators must be aware of.

What advice would you most like to give to a treasurer/financial manager who is stepping out of the business world and into the church world?

Be ready for a transition in culture. The shift from business to church culture is often a huge difference from working with a business management focus in the business world to focusing on serving others and working with ordained ministers in the church world. I think that transition in culture is often underestimated.

What can a treasurer/financial manager do to get better at working in a church setting?

There are a number of things that a church administrator can do. Attending conferences that offer classes and workshops that are helpful. That may be in person. That may be online. There may be certifications that might be appropriate, but being a lifelong learner is probably the most basic concept for someone working in the financial management area in churches.

For more insights from Busby and other financial experts, see “Five Tips for Finance Professionals Joining a Church Staff.”

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