Many pastors are forced to resign each year because of their church’s financial crisis. The problems usually start small, with the pastor only needing to make a few changes to turn things around. But eventually, they can snowball out of control, causing significant problems for both the person in charge and the ministry itself. Here are some tips on how to manage church finances.
How to Manage Church Finances — Self-Evaluation
Before you can manage church finances effectively, you need to know where your ministry is financial. Conduct a self-evaluation before the next service meeting so that everyone in leadership understands what condition your budget is in. Determine how much money you have coming in, as well as exactly where it is going. This will help you come up with a plan to get back on the right footing financially.
Donations, Debt, and Income
Your church income comes from three primary areas: donations, debt, and investments. In general, churches pay no taxes because they are considered non-profit organizations. Thus, they rely on donations and investments to make up for this lack of tax revenue. However, some churches do receive some money from the government and local initiatives; it’s important to be aware of these grants and their impact on your ministry’s financial health.
Church Debt
Debt is not always bad, but it can be if your ministry spends too much on interest payments. For example, some churches have credit cards or loans for their building. This can be an excellent way to finance improvements of the space without taking away from other budget items. However, it’s important that any church debt is repaid and part of the ministry’s yearly budget. If this debt isn’t paid back on time, then your church will lose money or be forced to renegotiate terms with the lending institution.
Church Investments
Like any organization, churches need to make wise investments; however, they often prefer safer income investments, such as money market accounts or fine art. The goal is to make money while keeping the principle safe; this means that your church can retain its current funds without losing any of them. If you’re considering investing in the church building, then be sure that it will not conflict with your financial manager’s investments. This could lead to ethical or legal problems.
Church Debt Versus Church Investments
When determining whether or not to take on debt versus investing, you should first look at your current budget. Donations are constantly fluctuating, so it’s best to use debt as a supplement if other income streams are small for the year. If your donations continue to be low after the first part of the year, then it may be best to avoid taking on additional debt and instead invest your money in a financial market.
In conclusion, the key to managing church finances effectively is to understand your current financial situation and seek advice from a trusted professional if necessary.