Managing money and understanding financial reports is an administrative responsibility that is vital to the ministry of the church. You could even say that it’s an act of worship. Good stewardship of the resources God has given to facilitate the life of the church reveals our integrity, devotion, and commitment to moving ministry forward.
It takes a watchful eye and dutiful practice to ensure the finances of your church are being used to fulfill the mission God has given you.
Some churches opt for hiring an outside professional to manage the books. Others hire a dedicated staff member, and still others utilize a diligent volunteer. Whomever is keeping an eye on the bank account – a treasurer, an accountant, or an administrative assistant – they need to have a solid understanding of how to generate financial reports for church leaders and pastors to gauge the financial health of the church.
There are three essential reports that every accountant needs to produce. Every board member and church leader who is part of the financial discussion needs to understand and know how to read these reports.
The three financial reports you need to understand, and why they matter, are listed here:
The Balance Sheet
This is a snapshot of where your church stands at any given point in time. It highlights your assets and liabilities. It’s useful for understanding the long-term financial position and health of your church. In essence, it shows what you own and what you owe. It lets leaders see what the church is financially capable of doing in the big picture.
The Income Statement (AKA “Profit and Loss”)
This is basically the budget. It shows what ongoing income and expenses you have. By looking at past Income Statements, you can better project what you’ll be able to do going forward. It will also let you see where your money is being allocated, so you can make adjustments to the budget that reflect your priorities in ministry. This is best viewed and compared month to month.
The Cash Flow Statement
This is cash-in, cash-out. For short-term planning this might be the most important of all the financial reports. If your cash-out is more than your cash-in, you need to make adjustments; and sometimes, quickly. Especially during summer months or around the New Year, when giving might decrease, it’s helpful to keep a watchful eye to make sure you have enough cash-in to cover your expenses.
A good church ministry software – if it has giving and accounting features – is a great tool to manage all this in one place. It provides a less expensive solution than a full-time accountant and will most-likely be designed with the uniqueness of church finances in mind. What’s more, it helps you keep track of your donor (revenue) sources to help monitor what income you should expect.
Churches shouldn’t obsess about the finances. But, considering the importance of monetary resources and how they impact a church’s ability to move ministries forward, make sure you’re devoting enough time to manage, see, and understand where you stand as it relates to money.
Remember, money, like anything else, is a resource. Seek God to determine just where these resources should be applied and watch how He’ll honor your faithfulness. Don’t let your finances determine your vision. Let your God-given vision determine your financial needs and trust God to make all things possible in his timing!