Strengthening Church Financial Management: 7 Key Practices

Romans 12:4 notes that the body is made up of many parts, and they all have different functions. We use this analogy in many contexts, and it is appropriate when considering the workings of a church. Your church needs ministries such as preaching, discipleship, and worship, but you also need support ministries. These can include IT, facilities, administrative . . . and financial operations.

A church’s finance department is one of the most significant of its support ministries, as well as being one of the most misunderstood and overlooked. Yet church leaders rely on the information their finance departments provide, and if that information is inaccurate, significant—or even catastrophic—results can occur.

In the work I have done for churches and ministries as a certified public accountant, I’ve seen personnel layoffs, ministry reductions or discontinuations, and lack of debt compliance as results of improper financial management.

Even if a church finds itself in a difficult economic position, options are available through access to accurate and timely information. But the longer the problem continues without proper attention, the worse the consequences will be.

If you’ve lapsed in one or more of the following seven areas, it’s important to recognize why any lapses need to be remedied for the good of your ministry.

As a career auditor and consultant, I would be remiss if I didn’t note the most common mistake I see affecting ministries of all sizes. Weak internal controls not only leave the church vulnerable to financial losses, weak controls also leave individual staff and volunteers vulnerable to allegations that they may not be able to defend. To provide basic protection for the church’s financial assets, it’s critical to have segregation of duties over cash receipts. It’s also vital for disbursements to involve at least two people in the custody of the asset, record keeping, and authority of transactions.

It is not uncommon to “settle” for someone when filling a paid or volunteer position, but the resulting lack of competence can be frustrating for both the individual and the ministry and can certainly diminish the capacity of the role. Management of the church’s finances provides the foundation on which the rest of ministry happens. Allowing someone to serve in a role for which he or she is not qualified is not helpful, even if you are doing it to help an individual in need of a job or a relative of another employee. Having the right people in the right positions is crucial.

Try to name something a person can be successful at without training. Whether it is a hobby or a career, everyone needs to have the proper training in order to do his or her best. Training, however, is often overlooked or cut from budgets as a “perk.” That mindset needs to change, because a well-trained, proactive finance team will make better decisions, provide better information, and become a crucial element in the ministry’s success.

There are two aspects of financial reporting: preparation of the reports and understanding the information reported. Financial managers need to help with both. You should consider the information and format of the report to be certain it is accurate, timely, relevant, and succinct. You should also help the individuals who use the information to understand what the report means and how to apply the information. Just as the finance department needs training, church leadership and the board will need training, as well. The finance department can provide this training or help find others who can.

Documenting processes and procedures is not something that should be done once and checked off a list forever. Every church needs to have a processes and procedures manual in place and review and update it at least annually. People, processes, and software change, and information can quickly become outdated when that happens. Churches should also have a record retention and document destruction policy in place. This will notify individuals of the requirements necessary to maintain and destroy financial information.

More ministries are becoming aware of the need for succession planning for the senior pastor. If your church has not done this, or you feel you have several years before your leader retires, please consider the importance of taking this step now. Things can change unexpectedly, and a well-considered and thorough plan takes time. Considering succession planning for other roles within the church—both paid and volunteer positions—is also important. You should always be considering the next person in line for any key position.

It’s a true saying that “The one thing you can count on in life is change.” If you are reading this, you likely have some responsibility for or interest in the finances of your church. It’s an environment that is constantly changing. It is critical that someone in your ministry be tasked with understanding the implications of changes in state legislation, accounting standards, and the regulatory environment (such as tax laws and employment regulations).

This list of areas covered in this article is not comprehensive, but it certainly provides key areas to consider as you conduct your various financial operations. Your church is most likely better at some of these items than others. I encourage you to go back to the links offered in this article for additional information on areas that may not be as strong. And keep turning to Church Law & Tax for other practical articles and books and downloadable resources on finance-related topics that will help you do your job well as you seek to support your church and serve God’s kingdom purposes.