Ministry Business Operations: Do Yours Need a Tune-up or Overhaul?
(Originally published as an article within ECCU’s former e-publication, Ministry Banking Today.)
Even though you’re a ministry, you still have many of the responsibilities of a business. But your motivation is more than just success—it’s stewardship. Wisely managing your God-given resources takes deliberate effort and a carefully formed plan—typically reflected in your ministry’s business operations.
To gain a better understanding of healthy ministry business operations, Ministry Banking Today interviewed Dr. David Fletcher, founder of XPastor, an organization committed to providing management resources to executive pastors. According to Dr. Fletcher, business operations for ministries are generally comprised of three main areas: Income, expenses, and general reporting. Here, Dr. Fletcher outlines best practices for each of these key components.
- Good financial software to process donations and provide receipts is a must. (A few to consider: Dedicated software by ACS Technologies and Shelby Systems, Inc., Fellowship One by Fellowship Technologies, and QuickBooks Pro by Intuit.)
- If your ministry has a profit-generating business (an office with tenants, for example), keep careful records so you’re prepared to file your 990-T form with the IRS.
- For added accountability, be sure at least two unrelated individuals are present when processing tithes and/or donations.
- Have a system in place to weekly and monthly track your contributions, ensuring you have a good understanding of historical norms for your ministry.
- Practice “fund accounting” by using trackers for unique funding needs (e.g., the building fund, benevolence fund, missions fund, etc.) so that money is appropriately allocated as it comes in.
- Be sure to differentiate between payments and gifts. For example, money that comes from parents to cover the cost of sending their child on a youth trip is a payment, and a donation to the homeless ministry is a gift.
- Never allow the same person who cuts a check for payment to also sign the check.
- Set up an internal committee to review your financial reports on a regular basis (quarterly is recommended). And budget for an external review by an accountant annually (usually costs $800 to $1800).
- Regularly communicate with your donors about how ministry money is being used and minimize their fears of fraud by reassuring them that their money is being used appropriately.
- Publish a one-page financial review or year-end financial summary and make it available to supporters.
- Consider unique banking services, like Remote Deposit Capture technology, that will make your ministry most effective.
- Wisely invest your funds to maximize your return.
- Build a relationship with a competent banking professional that you trust for advice and resources. And keep your records in order so you’re prepared should you need to borrow.
Dr. Fletcher also suggests a few red flags that may indicate your business operations pose a potential risk for your ministry. These questions will help you determine the health of your operations:
- Does your ministry prepare an annual financial report?
- Does your budget align with your expenses (budget vs. actual)?
- What kinds of checks and balances do you have for office purchases? Does a supervisor approve all purchases—even for the senior pastor?
- Does your ministry have a good personnel handbook to make certain that you’re in compliance with the law and treating your employees fairly? Check out additional examples of policy manuals, handbooks, and forms at www.xpastor.org/policy/policy.