Being a good steward of your finances is challenging, whether you’re managing funds for a single household or a church of thousands.
However, when it comes to financial management for your ministry, there are extra factors you must consider.
When handling money for your family, you don’t have to worry about local and federal accounting laws. You don’t have to answer to anyone but your spouse for the money coming in and how it is being spent.
And while the Bible still instructs you to be a good steward when it comes to your personal budget, managing your ministry’s finances means you play an integral role in how the money is used for the Gospel.
A lot goes into being a good steward of your church’s money, but there are several practices you can implement to ensure healthy financial management.
1. Ensure Legal Compliance
The separation of church and state has been debated for centuries. But regardless of what you believe on this issue, there are laws and regulations that you must comply with in order to continue operating.
Good financial stewardship starts with ensuring that your ministry is legally compliant in every way.
You need to know what the rules are and make sure policies are in place to maintain compliance.
- What is your church’s tax-exempt status? Do you qualify as a non-profit according to IRS guidelines? Are there any activities supported by your church that could alter your status?
- Are there any reports or forms that need to be submitted regularly? Reporting requirements differ from state to state, both in terms of what must be submitted and also how frequently reports must be made. You need to know what the requirements are for your state and if any federal requirements apply to your ministry.
- Are you following the unique fund accounting guidelines set by the IRS? Your church must be able to show that you’re using funds according to how the donors intended them to be used. Setting up specific funds (e.g., general, building, missions, children’s ministry, etc.) lets donors clarify their intentions for the funds, helps you honor those intentions, and puts you in compliance with those guidelines.
- Is your church in compliance with federal payroll tax regulations? Regardless of how many people you have on your church staff, you must follow the requirements for payroll taxes. There are often unique situations for church staff, so look carefully at what the rules are for your staff.
2. Seek Professional Expertise
If the list above sounds complicated, it’s because it is.
The good news is that you don’t have to bear the burden of compliance on your own.
Your in-house accountant or financial secretary likely knows the rules and regulations and will help your church ensure that it is following every guideline correctly.
But if you don’t currently have a dedicated financial manager on your staff, you should regularly communicate with a professional to ensure you aren’t unintentionally breaking any state or federal laws.
Ignorance is not a valid reason for failing to comply, so make sure you’re taking steps to work with those who know what they’re doing and can give you peace of mind regarding financial management.
3. Create and Stick With a Budget
Your budget is how you plan for the year, identify ministry possibilities, and account for where each anticipated dollar is going.
To build an effective church budget, you need to:
- Embrace biblical principles of stewardship (integrity and honesty, accountability, wise resource allocation, generosity and giving, and financial education).
- Develop a comprehensive budgeting process (assess your financial health, set clear objectives, collaborate for your budget planning, allocate resources strategically, monitor and review your budget regularly, and be flexible and adaptive).
- Cultivate a culture of generosity (educate your congregation on the biblical principles of stewardship and generosity, lead by example, provide opportunities for giving, celebrate and acknowledge contributions, provide financial education, and emphasize the impact of giving).
- Implement financial accountability measures (establish clear financial policies, segregate duties to prevent conflicts of interest and mitigate the risk of misconduct, implement internal controls like reconciling accounts and periodic internal audits, conduct periodic external audits, establish a financial oversight committee, and train and educate your staff, volunteers, and leaders involved in financial management).
Once your budget is set, you need to stick as close to your budget as possible.
Things happen. Congregational needs arise, buildings need unexpected repair, and natural disasters hit. That’s where the emergency fund you build into your budget comes in (we’ll look closer at creating an emergency fund later).
If something requires more financial support than your church can reasonably allocate, consider whether you can meet the need by pulling from other budgeted areas without negatively impacting discipleship or if you can ask your congregation to provide support specifically for that need.
Being a good financial steward means using your funds wisely, and that means sticking to the strategic and reasonable budget you create.
4. Discuss Money Regularly
Your church’s financial health should not be a secret. Your congregation should be familiar with your budget and with how each dollar is spent.
This isn’t to say that you need to preach more on giving or dedicate large portions of your services to finances. But you should make a habit of giving regular updates on the status of giving, how the income of tithes and offerings relates to your budget for the year, and how money has been spent to date.
Whether you give these updates quarterly during your services, as part of your regular monthly newsletter, or in your weekly bulletin, keeping your members in the loop on your finances helps with transparency and accountability.
Part of being a good steward is being able to give an account of how the money in your charge was used. But you aren’t the only one charged with stewarding your ministry’s resources.
Your congregation should participate in discussing how money is budgeted and spent, and should hold the staff accountable to that budget.
5. Establish a Financial Oversight Committee
Earlier, we mentioned one of the ways to implement financial accountability measures in your budgeting process: establishing a financial oversight committee.
Good stewardship requires integrity and accountability. While you never want to see misconduct, even accidentally, having a team in place beforehand mitigates the risk of funds being misused and inaccurate reporting.
This committee must be above reproach. Its members should have proven financial management skills and be trustworthy, as they will be participating in the stewardship of your church’s money.
The financial oversight committee would review financial reports, ensure financial accountability and transparency, and independently verify that every dollar is spent wisely, following the congregation’s intent.
6. Build an Emergency Fund
As we mentioned earlier, things happen. We live in a fallen world where tragedy strikes swiftly and unexpectedly.
Just as you have a personal “rainy day fund” set aside in case your refrigerator breaks or your car stops running, you should have a line item built into your budget to help manage those unexpected expenses.
The amount of money set aside is up to your staff and financial advisors, but if you don’t have any finances allocated to combat abrupt and unforeseen circumstances, you’re opening your ministry up to financial trouble.
You don’t want to resort to pulling funds from other ministry areas, limiting their effectiveness and success, or find yourself struggling to pay bills or make ends meet at the end of the year.
Good financial stewardship requires good planning.
The Parable of the Talents warns against hoarding money out of fear, but designating a portion for the unexpected displays wisdom and enables your ministry to continue to make disciples regardless of what comes your way.
Conclusion
You have been called to be a good steward of the resources the Lord has given to your ministry. While that may seem overwhelming at times, there are things you can do to make the task bearable.
By implementing healthy practices, you’re setting your church up for financial success and ultimately honoring God by wisely and effectively using the gifts He has given.
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