Balancing Spiritual and Business: What Accounting Firms Need to Know about Churches

My husband and I learned about churches from the inside out. As church planters, we moved to Seattle in 2003 to start a church. He became an administrative pastor. I handled the bookkeeping and accounting processes. The church planting team raised more than $75,000 for the cause. In a short time, the church grew from meeting in a coffee shop to a dedicated organization in its own building.

Since that time, we’ve founded and built our own accounting firm with numerous church clients with budgets from $50,000 to $1.5 million. Following is information that details the unique environment and needs of churches and how accounting firms need to address them.

Pastors Face Complex Demands

Pastors are extremely busy and it’s often a challenge for them to focus on everything they handle. In the course of their day, they could be leading anything from a service to counseling a couple in a marriage crisis. The spiritual needs of the church and its community are diverse and certainly don’t follow a regular schedule.

Pastors must ensure that the business side of church operations remains above board. Financial performance often keeps pastors up at night. They question, “Are we going to make our budget? How are we going to meet budget this summer with vacations and a decline in regular donations?”

Accounting firms should recognize – and minimize – the manual or low-priority tasks that can fall on a pastor’s plate. This can happen by introducing a reimbursement policy and process, migrating to cloud-based technologies and integrating accounting systems so pastors can get a comprehensive account of their church’s performance in a matter of moments.

The Skills Levels of Ministry Leadership

Oftentimes, the most effective ministry leaders are the most passionate about the ministry to which they are assigned. Typically, ministry leaders are volunteers. They have to be passionate in order to volunteer their time and ensure key initiatives within the church – for example education, outreach or events – succeed.

Volunteers, however, might not know about budgeting or understand budgets. The numbers may confuse them or they fail to understand the impact of complex reports. Likewise, guilt or an overly high level of caution may make them hesitate to spend their budgets on programs that need financial (and budgeted) support.

At our firm, we’ve created specific ministry leader reports that are simple, easy to read and shares the budgeted amount and what they have spent to date. It helps ministry leaders continue to improve the church and prioritize needs.

Collaboration

As with ministry leadership, volunteers play a huge role in church operations. Beyond the paid staff and contractors, the volunteers often live in different locations, have varying schedules depending on their work and may only have a limited amount of time to share. They often get things done in their own time and in their own way.

In terms of accounting and bookkeeping, coordinating individuals for certain processes can pose a substantial challenge. How do you expedite reimbursements if the person who needs to approve them only visits the church office once a week? Who do you need to track down to sign a check? And where are they?  

An accounting firm working with churches must be able to accommodate an accelerated level of collaboration for its critical processes. This most often comes from cloud-based technologies instead of paper- or desktop-based systems. Instead of requesting signatures and the submission of paper, staff and volunteers can submit requests online or approve the payment of a bill in a few clicks from a mobile device. There’s no waiting for an upload of the latest information to complete a report. Supporting documents can be accessed via mobile devices and questions submitted and answered quickly and electronically.

An Elevated Potential for Fraud

No church wants to be a victim of fraud. Yet, in a church environment the potential for fraud can be substantial. Churches are often highly trusting of volunteers. Leadership may not want to offend participants by putting policies and procedures in place.

Fraud often happens when an individual within the church – maybe even a well-respected and loved church member – takes advantage of lax processes. If this individual is given an advanced level of access to banking accounts (for example) without oversight then they are practically set up to steal from the church.

An accounting firm should separate the duties – almost like auditors – and turn a keen eye to structure and stakeholders to eliminate fraud. A good firm can take the pressure off of churches to enforce policies and procedures. For example, a person depositing money shouldn’t be able to sign checks and impact a banking account.

Likewise, technology can help reinforce a fraud-resistant environment. Cloud-based technologies can provide specific audit trails in every system that shows who logged in and the transactions associated with them. For bill pay, an area particularly ripe for fraud, technologies such as Bill.com provide permissions-based workflows and access. For each bill that goes out the virtual door, you can see who reviewed it, approved it and paid it. Plus, the checks are drawn on the Bill.com account and delivered online. Both of these steps provide an additional level of protection for churches. Auditors can be given access to review activities in Bill.com, and have the ability to review archived information. This means someone may view a bill paid in any given year and access any activity associated with it.

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Jessica Daley, CFO of Xcelerate Business Solutions, Inc., has always enjoyed budgeting, problem solving, and organizing financial chaos. She is a master at finding the best deals, enjoying life on a dime, and discovering ways to save money. Jessica graduated with a B.S. in Business Finance from Liberty University in 1995. She became SPHR (Senior Human Resource Professional) certified through the Society of Human Resources Management in 2011. She is certified as a QuickBooks ProAdvisor through Intuit for both desktop and online versions is Xero certified as well. She is also a well-versed, advanced Bill.com expert. This highlights her thorough knowledge of cloud-based products that can help your business succeed.