Church Accounting is positively scary in some churches…. and I’ve seen it from all sides.  I’ve been on staff as a minister, and I’ve been a “pastor in the pew” as volunteer. I’ve also been doing business with churches for the past 12 years through my www.sundaysoftware.com publishing work. I’ve dealt directly with church financial processes and personnel through the sending of invoices, collections, running their creditcards, etc. Along the way I’ve also heard a lot of stories from churches. Thus, I can confidently say that WE in the Church have accounting problems.

Accounting procedures and practices in many churches are SO loose as to be NEGLIGENT.

And the negligence is about MORE than just money or procedures. It’s about confidence and trust. As someone to whom churches have owed money, and as a giving member who has been asked to “give more,” it is distressing to know how some church handle their finances. And it has made me question the OTHER decisions they make.  Quite literally, HOW you “store up your treasure,” -how you manage it, will tell me where your heart is also. And to turn another biblical phrase, the mis-management of money is likely springing from the same root that other problems are already or will in the future spring from.

One glaring case in point…
At the church where I spent the last 10 years as a volunteer pastor in the pew, they had occasional bill-paying and cashflow problems, and didn’t seem to have enough money for certain important budgets -even though their giving grew nicely every year, even 10 to 20% in some years. A succession of treasurers and bookkeepers didn’t help.  Then last summer they started a $1.5 million dollar building campaign. Yet at the same time, some of us were aware of yet another bill-paying & income problem being swept under the rug. No so coincidentally, they had other financial and programmatic deficiencies in that church, and many of those problems eventually led to our loss of confidence in the pastor and leaders. And we weren’t the first  to leave because of them.

As givers we are told to give on faith. But we are also taught to invest wisely, …which leads me to this first point below…

Part of the problem is theological:
Pastors and leaders love to tell us to “give in accordance with what we have been given.” Or to “give sacrificially, as did the widow.” But they rarely quote the Parable of the Talents during the annual appeal, –the one where the servant who mishandled his master’s money was cast out.

We are told to “give on faith” –which is exactly what giving is like when the church has accounting problems. …The evidence of “things unseen” being an apt description of many church financial practices!  But is it “good stewardship” when the giver doesn’t hold the receiver accountable? No.

Part of the problem is knowledge:
Many church leaders, pastors included, do not know how to read a financial statement. They do not know the right questions to ask, and have little or no accounting background. Most members assume there is a “brain trust” somewhere faithfully looking over the numbers and paying the bills. Whereas the reality in many churches is that there is ONE MAN paying the bills from his house. Or one part-time, low-paid bookeeper doing what they are told, and being overseen by a pastor who has no bookkeeping experience. Or a committee made up of a well-meaning, but inexperienced and rotating cast of volunteers.

Part of the problem is perception:
Some pastors do not believe church finances are part of their job description.  Yet, nobody needs to understand the congregation’s finances more! Many members ASSUME the pastor is able to provide financial leadership to the congregation, and they look to them for help and cues. If they only knew.

Part of the problem is rooted in poor budgeting practices:
Many churches spend more than 75% of their budget on “fixed” costs, such as staff salaries, benefits, and utilities. In one case with which I’m extremely familiar with, the percentage was over 85%. This leaves precious little room for seasonal cash flow issues, and special purchases and repairs. Add to that a few accounting mistakes and a church (like the one where I formerly attended) can get in trouble quick. It’s the equivalent of being “house rich, cash poor” …and it forces many churches to juggle the payment of bills over many months.  (What gets cut? Program and Mission. What’s their solution? “Give more!”  Sound familiar? If we only had a little bit more money…) 

Part of the problem is people:
In many churches I’ve had dealings with, paying the bills and managing the accounts is the job of one volunteer who has done it for so long in their own peculiar way that they feel above reproach. They will have two people count the offering plate cash, but only one person balance the books.  Even with churches that have professional bookkeepers, they may be good at recordkeeping, but have little investment in or understanding of the overall picture. And they have a vested interest in not admitting mistakes.

I’ve seen this happen with groups of people too…  church council members afraid to ask questions, or raise an alarm -for fear of exposing their lack of understanding. And/or, financial issues kept quiet for fear of affecting giving. In one personal example, I heard several stories in my former church about financial inquiries during meetings being brushed aside. Pride goeth before the fall.

Aside: the problem is not particular to small churches. Many mid and large churches with paid bookkeepers have screwed up invoices with me, double paid, never paid, and otherwise wasted my time and theirs.

Part of the problem is low expectations:

Quite simply, many members just don’t expect much in the way of “professionalism” out of the church. “Quaintness” and “antiquatedness,” ”good ol’ boy” practices and a myriad of excuses (”well, we’re small”)  serve the low expectations of some members, and they become accepted practices. Again, we preach “giving” but need to preach “receiving” as well.

Some Solutions to start with:

1.  Grow the membership and giving, but do NOT commensurately grow the staff.  In business this is called “reducing overhead.”

2. Grow cash reserves.  Savings are an investment in the future which the master will be pleased to find upon his return!

3. Have an outside financial expert review all your accounting procedures.

4. List unpaid bills over 30 days on every report to the church leaders. It’s easy to do with today’s accounting software.

5. Simplify financial statements, and mail them out before the meeting. Better yet, make them available to all members… this will ensure you make them understandable -as a way to avoid their constant inquiries!

6. Appoint a church leader with financial experience to be the watchdog, not the Treasurer.

7. Insist that the pastor get financial training. Ask for it from your local denominational group.

8. Initiate an all church review of each budget. Even in small churches and small budgets, budgeting is a mysterious process that’s often full of guesses. I know from working with CE budgets over the years, that the process of creating one is full of wishes, not facts. Committees often start with what they “asked for” last year, not what they actually spent, and councils rarely scrutinize expenses. Bluntly put: in many churches large and small we have an adversarial budget process run by financial amateurs.

The review also needs to include staffing which is the largest fixed cost in all churches.  Staff salaries are often based on what we paid last year, not how well the tasks were performed. And rather than ask for more efficient staff work, churches are more likely to add hours to a position, or new positions, based on the staff’s assessment. And while church staff might be really good at what they do, few have ever been trained in time-management or staff management.  In the corporate world,  staff management, job review, and re-training are not considered “extras” -they are considered essential to the health of the organization.

More observations from my business dealing with churches…

As a businessperson doing business with churches, you might be surprised HOW OFTEN church credit cards are over their limit. The ‘watchdog’ should have access to the online account and be watching it.

You would be surprised how many churches large and small do not pay their bills on time, over even within 90 days. This would be cured to a large extent if the Leadership coucils were aware of which bills were unpaid, and that their church was a deadbeat.

Nary a month goes by where I don’t have to return several checks because churches pay the same bill twice. A review of how YOUR bookkeeper actually works, their “Standard Operating Procedures” …and their checks and balances, is in order.

One of the most time-consuming things for us has been to RESEND lost paperwork,  …paperwork that gets lost as it travels from volunteer -to committee -to treasurer for approval and signatures. Inefficiency creates mistakes, wastes time, and wears people out.

And I deal with church staff who are often EMBARRASSED when I contact them about an unpaid bill, yet they have been told by the Treasurer that it has been paid, only to discover that the Treasurer didn’t mail the check until the next month. I know of a church secretary who left her job, in part, because her social security number was on the church card, and when the church didn’t pay the bill, it went on HER credit report.

And because we take creditcard payments, I’m often contacted by churches which no longer have one because ”a staff member abused the card.”

 Church Accounting DEFINITELY needs to be “hacked.”