Does your church finance committee do what is necessary to sustain a vibrant ministry?
Churches elect or assign members to serve on a Finance Committee.
This team of
people is responsible for the management and stewardship
of church financial resources.
This crucial
committee can have a significant influence on the sustained financial health
and growth of church assets.
When
mismanaged, this group can negatively affect the long-term financial viability
of a church – something no one wants to be responsible for.
Church
Finance Committee Duties And Responsibilities
1. Revenue
Projections
It is
difficult to budget without having a realistic idea of how much money will be
available.
Take a
realistic approach to project revenues by analyzing historical giving, attendance
patterns, and average member donations.
For instance,
run a report from your church management software that shows how many giving
households you have.
Then
determine the average monthly giving for those combined households.
Remember to maintain
confidentiality through this reporting process.
Err on the
side of caution and base projections on real giving patterns rather than
hopeful increases.
For instance,
if your church is in the middle of a capital campaign, do not assume weekly
giving toward the general fund will increase when members are stretching to
designate funds to a building project.
2.
Creating A Budget
The church finance committee assists in establishing the global budget based on revenue projections and allocates dollars to individual departments.
The
individual department managers are responsible for creating their own budget
estimates that are based on the church
strategy, associated department goals, and resources that are allocated to
support department goals.
Allow
individual department managers to prepare their budget estimates. This simple
step will result in greater accountability, more accurate reporting, and
increased reliability.
For instance,
if the church has a strategy to grow its youth ministry, there would be budget
dollars allocated to the youth department to support those efforts. The Youth
Director will then present a budget based on program needs and strategy.
The advantage
of this approach is that working managers are more apt to follow their budgets.
Because, they
participated in the budget process and understand the reasoning behind it – as
opposed to a budget handed down to them from above.
A manager’s
involvement in the budget process adds a layer of accountability in that they
have no one to blame for failing to meet their budget requirements.
3. Budget
Review
A budget is
simply an itemized allotment of funds and therefore requires monitoring.
The church finance committee should be monitoring the budget every month by reviewing the actual dollars that came in, the actual dollars that went out and analyzing any variances.
Midyear
adjustments may be made to the budget when projections fall short or unexpected
expenses come up.
4.
Emergency Funding
Even the best
of budget planning can go awry when an unexpected major expense arises.
To offset
this, allocate a percentage of budget dollars to emergency funding. Set aside a
percentage of revenue to an emergency fund bucket.
Create a
definition for an emergency and don’t touch the funds unless a real financial
emergency arises.
Keep this
fund growing year after year so that there will be financial resources
available when those unanticipated emergencies arise.
This
safeguard can prevent an unexpected budget variance.
5.
Financial Reporting
Systematic
financial reporting helps the church see how it is performing and adhering to
the budget.
Create
monthly or quarterly reports and keep church
leadership apprised of spending and budget variances.
If there is
an effort to raise building funds, show dollars that are available for the
project and what percentage of funds have been raised.
If there is a
focus to pay down church debt, report on that also.
6.
Responsible Stewardship
Churches rely
on the generous donations of its members to do what it does.
Being good
stewards of those funds is a primary responsibility of the church board and
finance committee.
There should
be a way to tie every expenditure to its support of this mission.
Consequently,
this team of dedicated people should challenge any spending that does not
support the church
mission, vision, or strategy.
7.
Safeguarding Church Assets
The board,
along with the finance committee are responsible for ensuring that there are
proper financial controls of church assets.
This
committee should be writing cash
handling policies and auditing the process of anyone who handles church
money.
This includes
ensuring there are safe places to store cash, that no one is ever alone with
money and that there is constant supervision of members, volunteers or
employees who come in contact with cash.
If you think embezzlement
in the church is not common, think again.
8.
Ensuring A Profit Margin
Profit
margins are how nonprofit organizations grow their capital. Since nonprofit
organizations can’t take profits out of the organization, they invest any
dollars that are above expenses back into the organization.
Church budgets
should designate a percentage of income for a profit margin.
For instance,
if a church brings in $500,000 and budgets for a 5% profit margin, it will be
saving $25,000 a year that can be reinvested into church facilities.
Imagine what
10 or 20 years of growth could do with that safety net!
9. Debt
Management
It is
difficult to get a church up and running without racking up some debt.
However, a
church is limited in what it can do if it is debt-ridden. The finance committee
should have a strategy for paying down debt, and that should be part of the
budget.
Paying down
debt can come through capital campaigns that are designated for debit
reduction, or it can be from aggressive debt payments.
Either
approach is fine, but the goal should be to get the church as close to
debt-free as possible.
10. Member
Financial Teaching
Church
members are only as giving as their personal finances allow. The finance
committee can influence members by offering classes in personal finance, budgeting, and financial
management.
Help members
get a handle on their finances and giving will inevitably increase.
11.
Manager Budget Training
Churches that employ people to manage various departments within the church should use the finance committee to help train church leaders on how to manage their budget, how to read and interpret financial reporting statements and how to address departmental budget variances.
A finance
committee should be able to develop budget training and create a simple process
to help managers become financially literate.
A church
finance committee is a financial think-tank for a church. Develop a finance
committee that is committed to budgeting, monitoring and, controlling how
church funds are spent and your church will have the necessary resources to
fulfill its mission, vision, and strategy.
Source: Smart
Church Management
ShelbyNext Financials includes the accounting functionality churches need to properly steward their finances. As you consider various accounting software options, keep in mind that software which isn’t specifically geared towards non-profit organizations may not have all the GAAP required features that you and your auditors need. Also, if you prefer an all-in-one ChMS and accounting solution, you have the option to integrate with ShelbyNext Financials ShelbyNext Membership, Shelby Arena, or other Ministry Brands products.