Fiscal Year

What should be a church’s fiscal year: The calendar year or some other 12-month time period? There isn’t a right or wrong answer; just find an answer that works best in your context. Second, there are pros and cons to having a calendar-year or non-calendar-year fiscal year. For instance, churches receive as much as 5% of their annual receipts in the last 10 days of the year, and it is impossible to spend that money before December 31. That leads to the question: should a church’s fiscal year end on 12/31 when it can’t use all the funds given to it, or should it use a different fiscal year?

Some denominations, such as the Nazarenes, require a different fiscal year; all Nazarene churches have a fiscal year which ends on April 30. Southern Baptist churches historically start on October 1 and end on September 30, but it is not mandated. Below is a list which was initiated by Brandon Woodard, a colleague and friend of mine.

Reasons not to use a calendar year as a fiscal year

  • Church won’t have to rely on December’s offering to meet their annual budget receipts or not
  • Allows the church to spend the December gifts in the subsequent calendar year because it is part of the December fiscal year
  • Spreads out the workload of calendar year-end closing of inputting a new budget; sending out donor gift statements, W-2s, W-3, 1099s, 1096; updating payroll increases, benefit premium changes; opening and closing fiscal years on the General Ledger; and all other year end closing procedures in a 30 day period (December 15-January 15)

Reasons to use a calendar year as a fiscal year

  • Most church members presume their church is on a calendar year
  • Many churches will receive more money in the last few days of the year than they can spend and these “unspent budget funds” can be set aside in the next fiscal year and used to fund reserves, pay for capital needs, knock down debt, or any number of other things that the church didn’t budget or plan for
  • It provides the opportunity to encourage people to be generous at Christmas and to help the church out even more

Personally, I prefer a calendar year as the fiscal year. It requires the church to be fiscally prudent throughout the year and then it can provide some monies for major needs. Also, many if not most businesses (including the IRS) use a calendar year, so society has trained people to use it.

Lead On!