The Financially Healthy Church

The well-being of a church is often gauged by the culture of prayer, worship, discipleship, engagement, and spiritual growth of its members. While these are essential to a church’s well-being, it is wise to look beyond the platform and pew when determining the overall health of a church. The function of administration, namely, the management of finances, also contributes to the inclusive function of the body of believers. A financially healthy church uses effective systems and processes to proactively plan and manage the flow of money through the church. Establishing a healthy culture of stewardship will produce positive results for years to come. 

Before further defining a financially healthy church, let us take a moment to review unhealthy financial practices in a church setting. Inefficient bookkeeping systems, unbalanced checkbooks, and lack of administrative accountability, spending policies, and recordkeeping can all be categorized as unhealthy financial practices. Failure to properly manage money, maintain adequate records, and have proper oversight and policy controls in place can become a legal matter resulting in the involvement of the Internal Revenue Service and other legal authorities. Online resources, such as ChurchLawAndTax.com, can provide guidance when it comes to avoiding unhealthy financial management practices. 

Let’s now consider financially healthy practices for church administration: 

1. Legal Documentation – The legal operation of a church requires the entity to be properly registered with the Secretary of State’s office. Having Articles of Incorporation on file with the state, as well as maintaining up-to-date Bylaws, board meeting minutes, annual business meeting minutes, and periodic registration filings with the Secretary of State will ensure a church is operating in good standing from a legal perspective. 
2. Financial Accountability – Financial accountability begins with accuracy and ends with transparency. The ability to ensure that every dollar is properly accounted for and that all funds are fully reconciled will build trust with the board, members, and lending institutions. Accountability is achieved when financial reports are reviewed by more than just the pastor. 

The Church Loan Fund recently surveyed its borrower churches to obtain a list of the most commonly used administrative software programs. All software fell into two categories: 1) Accounting and 2) Member Management. The top three responses in each category were as follows: 

Accounting: Quickbooks, Aplos, and ChurchTrac

Member Management: Planning Center, Breeze, and ChurchTrac

There were a wide range of answers, even including basic Excel spreadsheets. The important thing to note is that financially healthy churches utilize effective software programs to ensure accountability, accuracy, and transparency. 

3. Faithful Giving – UPC churches are known for having “tithing centric” budgets. This simply means we believe and teach the practice of giving tithes and offerings to the work of the Lord. The Church Loan Fund’s analysis of several hundred churches revealed that financially healthy churches receive an average of $2,100 in tithes and offerings per attendee annually with amounts ranging from $1,200 to $3,200 per attendee (total tithes and offerings divided by average attendance). This number can vary depending on local economics.

4. Reasonable Payroll Expenses – Further analysis by the Church Loan Fund revealed that financially healthy churches with paid staff maintain total payroll expenses within a range equal to 40%-45% of total tithes and general offerings. As a rule of thumb, payroll plus rent or mortgage payments should not exceed 65% of tithes and general offerings. Payroll expenses include all types of expenses associated with having staff (salary, housing, vehicle, cell phone, etc. for all compensated staff). 
5. Proper Expense Management – Categorizing all expenses into five basic categories can help a church establish healthy financial boundaries when it comes to spending money. Suggested percentages are as follows:
   • Payroll - 40% 
   • Debt/Rent - 20%
   • Operations - 25%
   • Giving - 10%
   • Savings - 5% 
6. Financial Alignment – Some churches choose to subsidize departments and ministries with general offerings while other churches require departments to have fund raisers to offset expenses. An example of “financial misalignment” would be if a church consistently struggles to make operational payments such as utilities or rent but allows departments to spend general offering funds without having fundraisers. Another example would be if a church uses funds raised for one purpose to be spent for a different purpose. Financially healthy churches have proper structures in place to ensure all funds are spent in proper alignment with the budget. While subsidies do occur, they should not occur to the detriment of operational needs. 
7. Reserve Funds – Having funds on reserve equal to three to six months of operational expenses is a financially healthy practice for individuals and churches alike. Having an established policy such as “5% of monthly net profit will be placed in a savings account” will greatly help a church achieve reserve fund goals. 

Using financially healthy practices will help you answer the call to be a wise steward of all God has entrusted you with. In doing so, the church will be able to support all areas of ministry while maintaining accountable, accurate, and transparent financial records, as well as build reserve funds to protect the future operations of the church and prepare for future growth.