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Mid-Year Financial Checkup for Your Church

July 22nd 2022

Whether you’re a pastor or church leader, it’s important to understand how your church is using its resources. Most churches operate on a budget and have to stick to it. This means that if the church spent more than it planned during the first half of the year, leaders will have to make adjustments so they can stay within their budget at the end of the year. That’s why it’s crucial to do a mid-year financial checkup at your church. 

Some adjustments your financial team can make could include cutting back on programs or asking donors for additional contributions.  

Churches should track their finances closely and review them at least once per year to ensure they are using their resources as carefully as possible. This is called a financial checkup, and it’s an important part of running any organization, including churches. 

You can use the following checklist to conduct your church’s mid-year financial checkup: 

  • Review your finances to date; compare this year’s budget with actual expenditures; identify areas where you have or haven’t met your goals and make adjustments in how you spend money. 
  • Review payment processes for vendors, suppliers, and employees. Are there any steps that could be streamlined or improved? 
  • Review policies regarding purchases (both large-scale and small) from vendors so that all purchases are made in accordance with the organization’s mission statement and core values. 

Analyze your spending. 

You’ll need to have a good idea of what your church is spending so you can analyze your finances. Some questions to ask include: 

  • How much money does the church spend each month? 
  • What is the budget for each item? 
  • What is the actual amount spent? 
  • Are there any items whose cost has exceeded their budgeted amount? If so, why? Are there ways that these costs could be reduced or eliminated altogether without affecting ministry effectiveness/quality and missional outcomes?  
  • Which items are most expensive on average per month and over time (e.g., $1,000 per month versus $50 per month)?  

Pro Tip: Rather than use a general accounting program like Quickbooks, Elexio’s accounting software is tailored specifically for churches and will help you to analyze spending and manage cash flow easily.  

Review your income. 

Now that you’re halfway through the year, it’s time to check in on your financial health. 

A quick way to do this is by reviewing your church’s income. If income doesn’t match up with the budget or goals, look closely at where the gap is and make adjustments accordingly: 

  • Does income match up with the budget? If not, figure out where it differs and what steps are needed to get there. It may be as simple as adjusting outreach campaigns or asking for more donations from regular givers. It could also indicate a larger problem—such as waning interest in church life or declining participation numbers—that needs attention now rather than later when it might be too late. 
  • Does income match up with goals? If not, take action immediately by figuring out how you’ll reach those goals with less money than expected (e.g., cutting back on programs). Rather than wallow over why something can’t happen due to its costliness, focus on how you’ll make things work despite lacking the resources necessary for success. Sometimes you’ll have to get creative! 
  • Is it sustainable? Make sure your sources will continue over time so they don’t dry up unexpectedly (or become unsustainable), which makes planning difficult. One way to make income more sustainable is to encourage donors to enroll in recurring giving. It makes tithing simple and easy for them, and it creates a consistent flow of income for your church.  
  • Diversify! Your church should have multiple sources of support so if one dries up unexpectedly then others will fill in until things return to normal. Host giving days; promote a ministry campaign; have a fundraising gala.  

Compare your budget with actual cash flow. 

Now that you have a good idea of how your finances are performing, it’s time to look at the difference between the budgeted and actual amounts. You can do this by looking at the income, expenses, assets, and liabilities side-by-side. 

Compare each item on your budgeted income statement with its corresponding item on your cash flow statement (your year-to-date revenues). In addition to adding up all these figures for both statements and comparing them directly against each other, you’ll want to calculate percentages so you can see where there are differences in performance between income and expenses as well as assets and liabilities. This will help give you better insight into how things are trending during mid-year performance review time. 

Talk about giving goals for the remainder of the year. 

It’s important to think about giving goals for the remainder of the year. That way you know how to adjust funds appropriately for the vision of your church. 

As you know, a goal is a statement that helps you focus on what needs to happen in order to achieve an objective. Goals should be SMART: specific, measurable, achievable, relevant, and time-bound. They should also be SMARTER—specifically written down so they can be tracked. Be sure that your goals are specific (i.e., don’t just say “increase giving”). Write out exactly how much more money you want to raise by December 31st compared to March 31st (i.e., raise $12k). Then write down smaller, actionable steps your church can take to get there. 

Plan for next year’s budget. 

You’ve made it to the second half of the year, which means you have some time to plan for next year’s budget. Planning ahead is important because it allows you to make decisions about what funds should go where. This helps prevent last-minute scrambling when you’re putting together your budget for the new year

You’ll also want to consider any major events your church wants to plan in the coming year. Look at the holiday calendar and decide ahead of time how much money will be needed for the holiday-related events and programs.  

Use church accounting software to help with your financial checkup. 

One of the best ways to efficiently track your church’s finances is to use accounting software that is designed with ministry in mind. Elexio’s church accounting software will allow you to automate and streamline tasks. Our secure, cloud-based solution integrates accounting, giving, and membership for comprehensive reporting. Start your free trial today or give us a call at 888.997.9947×1. 

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