At BELAY, we’ve been helping busy leaders for over a decade, and we’ve learned, no matter what organization you lead, finances are paramount to your success – and church finances aren’t any different.
Poorly managed church finances can hurt a pastor’s ability to lead church members and reach the local community.
After all, very little will wreck the movement of God more than weak financial policies and workflows.
Thankfully, it’s much easier to make changes now — before your church is in the headlines — than to try to reestablish those relationships after they’ve been torpedoed by a costly financial misstep.
We’ve identified some of the costly financial mistakes we see churches make in our resource, 4 Costly Financial Mistakes for Churches.
Here are some of the highlights:
Fraud
Fraud happens in the church because we let our guard down and place too much trust in a person, process, or system.
Without systems of checks and balances, fraudulent activity goes undetected until a major event in the church, such as a load application or audit.
Consistent fraud can be identified in debit and credit card usage and offering counts.
Some quick fixes include dividing and conquering, eliminating debit cards, creating expense reports, eliminating cash apps, and considering third-party support.
Payroll
Church payroll is unique. One that most bookkeeping and accounting firms donʼt truly
understand. Partner with a church finance firm that lives and breathes church finance and
church payroll so you can be confident in how your bookkeeping is handled.
More than half the churches we work with had been handling their payroll incorrectly. And itʼs not because they didnʼt care or they didnʼt try – itʼs because church payroll is an incredibly complex issue that most accountants and financial professionals donʼt understand because they donʼt deal with it regularly.
But – and hereʼs the hard truth – the IRS doesnʼt care that your accountant didnʼt understand church tax code or payroll. Your church can still get hit with massive penalties.
Designated Giving
If youʼve asked your givers to donate to a particular fund or campaign, that money can be used for that purpose – only.
Itʼs gone into whatʼs called a “restricted fund” and that word “restricted” is no joke.
Some church leaders think that “restricted” is just a suggestion.
Weʼve worked with churches whoʼve started a capital campaign, but a year later, theyʼd spent the thousands donated for a new building on other activities. They were robbing Peter to pay Paul – and thought it was totally fine to use that money for another purpose.
Itʼs not.
Again, itʼs not that these churches meant any harm; they just didnʼt know that a restricted fund truly is restricted. But theyʼre still responsible for where those funds have gone, and are now in the position of having to explain to donors in all future campaigns that they actually do know how to handle their money now.
Working with a bookkeeping and finance partner who can help you set up accounts properly and make sure withdrawals are happening for the right reasons will keep these situations from happening.
Lack of Rules
Your by-laws lay out who in your church is responsible for financial decisions, how those decisions are reviewed and approved, and where accountability falls when it comes to finances.
If your church is named in a lawsuit, the courts immediately turn to the by-laws to figure out whoʼs responsible for what. If your by-laws arenʼt clear – or worse are non-existent, your staff and board members could land in some major hot water.
Find a church leadership and process expert you can trust to walk your church through your existing by-laws, or who can help you create a set of by-laws of your own. Otherwise, you’re essentially sailing your ministry ship without a compass into some choppy waters.
Worse still, dozens of other scenarios could potentially wreck your churchʼs finances.
To help you figure out where to start and get back to growing your church, 4 Costly Financial Mistakes for Churches, will help you dive deeper into the four biggest things we see wreck churches when it comes to their finances – and what you can do to avoid them.
And if you decide you need to hire someone to take over your accounting and financial woes, BELAY can help you with that.
We’ve helped thousands of churches around the country, and weʼd love for you to be one of them. Getting started will be the easiest thing you do all day.
The post How To Avoid These Costly Financial Mistakes Your Church Could Be Making appeared first on Church Answers.