11 Things Your Church Finance Committee Should be Doing
This is an important committee because it can influence 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. Here are 11 things your church Finance Committee should be doing:
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 projecting revenues by analyzing historical giving, attendance patterns and average member donations.
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. Budgeting Process
The budget committee establishes 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 based on church strategy, goals and allocated resources.
Allowing individual department managers to prepare their own budget estimates makes them more accountable, accurate, and reliable.
The advantage to this approach is working managers are more apt to follow their own 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.
This adds a layer of accountability in that the manager has no one else to blame for failing to meet their own budget requirements.
3. Budget Review
A budget is simply an itemized allotment of funds and require monitoring. This committee should be monitoring the budget every month and reviewing the actual dollars that came in, the actual dollars that went out and analyzing any variances.
Sometimes there needs to be adjustments made mid-year 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. Keep this fund growing year after year so those unanticipated emergencies can be managed without impacting the rest of the budget.
5. Financial Reporting
Systematic reporting helps the church see how it is performing financially. 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. Good Stewardship
Churches rely on the generous donations of its members to do what they do. Being good stewards of those funds is a basic responsibility of the church board and finance committee. This team of 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 good financial controls with 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 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.
For instance, if a church that brings in $500,000 budgets for a 5% profit margin, they will be saving $25,000 a year that can be reinvested into church facilities. All church budgets should include a percentage that is designated as a profit margin.
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 teaching in personal finance, budgeting and common sense to finances.
Help members get a handle on their own personal 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. This committee should develop this training and create a simple process to help managers become financially literate.
A church finance committee is the 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.
Does your church finance committee do these things? If you church needs help with budgeting, capital campaigns, a personal finance training, etc. you can reach out to the Iowa United Methodist Foundation and set up a time to meet with us. Contact us today by calling 515-974-8927 or by emailing [email protected]
Originally published by Patricia Lotich in Smart Church Management on December 9, 2015.