Before deciding whether you need Betty the Bookkeeper or Alison the Accountant, it's a good idea to know what each do and how they can impact your church.
In general, bookkeepers help you keep your financial records in order. They help tell your expenses and revenue where they should go and help ensure your account balances and your accounting records stay in-sync. While the software they use can generate financial reports, few are trained in what those reports mean to you as the executive pastor. On the other hand, accountants typically have the ability (and education + background) to decipher what those numbers mean; however, most accountants are limited in knowing how to guide you as you make decisions because churches are quite different than for-profit and even non-profit businesses.
To take it one step further, a financial director or CFO with a background in church finance can not only provide you with the data from the reports, they convert that data into usable information and provide guidance on options on the actions that could be considered. This is where you can really make traction on directing dollars to invest in the key objectives and results of your church.
Regardless of whether you have a congregation of five or 5,000, the proper handling of funds are critical to the success (and the tax-exempt status) of your church. At the very minimum, you need to account for the flow of money through your organization. A qualified bookkeeper is the best and most cost-efficient person to step into this role. This is where we always recommend churches to start if they are a church plant, or if they are under $500,000 in annual tithes, offerings, or gifts.
For newer churches and those under $500,000 in annual giving and less than five or six specific ministries, basic reporting from a bookkeeper will usually suffice; however, as churches grow beyond this threshold in annual giving or in number of ministries, it becomes increasingly more critical to have insight and clarity into the details of your finances. This threshold is usually a great time to identify an accountant that can regularly help you and your church understand what the numbers mean. Your accountant will be vital as you start asking questions around "what can we afford" when it comes to purchasing a property, adding staff, etc. but want to do it without over-extending. We often recommend churches get connected with an accountant when any of the following are true:
As your church continues to grow, the complexity of your entire organization grows with it. Your staff size grows as your congregation grows, as does the importance of ensuring your focus becomes more narrowed. Then you can really articulate the vision you want to see and the things you want to do along that journey to get you to that destination. This is when it becomes increasingly more important that you're strategic in your finances, in how they are stewarded towards your mission and those specific actions, and that you're efficient in your overall operations. This is the territory that typically exceeds the capacity of accountants, CPAs, and accounting firms. This requires not only the fundamentals of accounting and finance, but the specific experience and strategic application that only someone who has led within ministry can provide. It's one thing for your accountant across town help you understand what your debt to income ratio is, but when you look to them on advice on what percentage of income your salaries should represent or how to forecast a giving campaign you're considering, you're in a dangerous place. We often use the example that you'd probably never ask someone to teach and guide your kids to swim if they've never even been in the water; however, churches lean on accountants and their firms for advice, despite they've never been in ministry to have the context their advice might bring.
This is where it's imperative to have someone as a financial director to lean on that helps oversee all aspects of finance, ensures all financial activities are executed, and you as the executive pastor has a partner in ministry to lean on for guidance. In the past, many churches see hiring a full-time employee for this role as the only path for this position, but there are a few firms that create significant costs savings with outsourced financial directors as well as both accounting and bookkeeping. Numerous churches in the $1m - $10m in giving are finding significant value in partnering with these ministries.
If you're a church that has passed the $1M in annual revenue, we'd love to talk with you at Church Central Office. We help executive pastors focus more on ministry by managing their end-to-end accounting including a dedicated financial director. We can schedule a call and talk through if we're a good fit or if there are other solutions that might make better sense.
Under that $1M mark? That's great too. There are several good options out there that give you what you need as well. Shoot us an email and we can give you some suggestions.
Ultimately, regardless of whether you're a church plant or a large and growing congregation, we just want you to get the support you deserve without breaking the bank by hiring an in-house accountant or financial director.