The words business and church aren’t often used in the same sentence, but for churches to continue their missions and help those in need, they must be run like a business.
The key to success is learning how to balance faith and the business of church.
The Dual Nature of the Church: Faith and Finances
In a perfect world, churches would run on faith alone. Unfortunately, finances must be taken into consideration to ensure the congregation can keep its doors open and continue to serve the community.
Embracing the Mission: Prioritizing Spiritual Growth and Outreach
Spiritual growth is one of the hallmarks of stewardship in church, and outreach plays an important role in it. Outreach allows a church to connect with the local community and even beyond.
In order to maintain the balance of faith and finances, churches must learn to prioritize spiritual growth and engage with the community. Faith and outreach must be at the heart of the church.
Ensuring Financial Stability: Managing Church Finances Effectively
Faith and outreach are important, but in order for the congregation to continue, you must act as if the church is a business. Churches rely on the generous donations of community members, and they have a duty to manage these funds responsibly.
To manage church finances effectively:
- Create a budget and revisit it regularly to ensure that it’s aligned with your current goals and financial situation.
- Create a plan and take action to reduce debt.
- Be honest with your congregation about expenses.
- Start building an emergency fund to ensure you’re prepared for a major expense (like a new HVAC system or repairing a roof leak).
Additionally, make sure there’s a system in place for financial oversight. Accountability is important, especially when it comes to church finances. Set up a budget review committee to oversee spending and debt management.
Remember that today’s decisions will affect the church’s finances tomorrow, so make them wisely.
Financial Considerations for Churches
Stewardship of church finances is complex and is both an art and a science. Finances are important, but stewards must take care not to lose sight of the church’s mission.
To achieve this goal, several financial considerations must be kept in mind for churches.
Budgeting and Financial Planning: Setting Priorities and Allocating Resources
Financial stewardship in church involves budgeting and planning to ensure that resources are allocated properly and in line with the church’s priorities.
The first step is to define these priorities. Which areas do the church need to prioritize its funds? For example, maybe the church building is in desperate need of maintenance and upgrades. Your priorities may be to buy church chairs, repaint the interior and repair flooring in some areas. Funds can be allocated to these activities first, and then make their way down the list.
Generally, staff salary and benefits account for the majority of a church’s expenses. After all, you must have people to carry out the work.
But what’s next on the list? Analyzing your current expenses will help you prioritize things.
Prioritizing expenses will also allow the church to allocate its resources effectively and minimize unnecessary spending.
Tax and Legal Compliance: Understanding the Regulations for Nonprofit Organizations
The business of church falls into the nonprofit classification. However, to be qualify for 501(c)(3) status, the church must meet the following requirements:
- Must operate exclusively for religious, charitable, educational or scientific purposes
- Cannot devote a substantial portion of its activity to influencing legislation
- Net earnings may not provide an advantage to private individuals or a shareholder
- Cannot interfere with political campaigns
- The organization’s activities or purposes must be in line with public policy and legal
The IRS requires churches and all 501(c)(3) organizations to document all expenses, income, receipts and credits. They must also file IRS Form 990 every year. Churches must be in compliance with regulations to ensure that they can continue operations.
Church leaders should understand the regulations for nonprofit organizations and, ideally, have a working relationship with an accountant who has experience with nonprofits and churches.
Fundraising and Revenue Generation
Churches may be nonprofit entities, but every church still needs some form of revenue to continue operations. Below are a few methods places of worship can use to raise the funds they need to accomplish this year’s goals.
Diversifying Income Streams: Exploring Different Fundraising Strategies
A startup church will need a lot of income to reach its goal. You’ll need to fund building or buying a church, land purchases, chairs, pews and decorations. You want to create a diversified income stream that consists of:
- Donations from church members
- Live-stream donations
- Weddings and marriages
- In-church events
- Church rentals
If you have the space, you can rent out a room for member gatherings that will include the option for attendees to make a donation.
Cultivating a Culture of Generosity: Encouraging Stewardship and Regular Giving
The business of church relies 100% on donations and regular giving. You need to encourage regular giving among your members, and this is an ongoing process that you must work on week after week.
You’ll come across multiple donor types:
- Major donors
- Recurring donors
- First-time donors
First-time donors often encompass your largest number of people offering donations, but you do want to turn them into recurring donors.
- Explain how the money will be used. For example, you may need to send congregation members to another country to spread the word of God. You can create a donation goal that encourages members to donate money to help reach the collective goal.
- Connect with members and spread the mission of God. You’ll need to focus on the messages that resonate most with your members.
- Set a good example by giving to members in need. For example, if John’s house burned down, you can use money in the church’s coffers to help rebuild the home. You can also offer food or accommodation, all funded by the very members that attend your church each week.
- Make a difference in the community and in members’ lives. You’ll find that members are more willing to offer weekly donations to help keep your good deeds going.
- Ask for donations, but never force them on members. You may not know the hardships some members are facing and you do not want them to feel obligated to give if they do not have the means to do so.
- Create a plan to raise a certain amount of donations per year and work with your members to reach this goal. Even if donations alone are not enough to hit the goal, you can work alongside members to raise the funds using other methods.
Keeping members updated on the financial needs and standing of the church will also help people realize why they need to continue donating money. Also, thank members for helping you reach your fundraising and donation goals.
The business of church is complex. You rely on donations and you’re a non-profit, but you do need to run your operations like a business. Church leaders must keep the church solvent, manage their finances properly and continue doing things like:
If you continue spreading the word of God, helping your members and managing your finances properly, you’ll build a church that will be the foundation of the community for decades.