church finances — Page 14

Church Credit Cards

Posted on December 24, 2012 Written by Steve Law

I think church-issued credit cards are unnecessary except in special situations (more on that later). I really am against the issuing of church credit cards and here’s why:

they lead to more work by a staff person, usually an administrative assistant to manage all the cards and track the receipts
they lead to expense since some staff will buy things more quickly than if they were using their own card
they lead to abuse by some staff (dealing with that is a personnel committee matter not a finance committee issue)
they are seen as a right and status symbol when they are neither

Here are my recommendations regarding church credit cards:

Staff should use their own personal credit cards when making purchases for the church. Then, the staff person should turn in a receipt and get reimbursed for that expense just like he or she would for mileage or any other purchase. This incentivizes the staff person to get the receipt and turn in the receipt in a timely manner. This addresses the single biggest issue regarding church credit cards – staff members who do not turn in receipts when asked for them and that causes problems for the church’s Finance Office.
- A way for staff to deal with this in a positive manner for them is to get a card with rewards points and then use that card only for church purchases. Write on the card “church use only” so you don’t get confused. When the bill comes in, turn in the statement and all the receipts requesting that the check be made payable to the credit card company (not to the staff person). At the end of the year, the staff person earns points which he or she can keep.
A church may want to have ONLY ONE church card in the office and that is for use by the administrative assistant when he or she is buying things online (from Amazon.com or an airline ticket or paying a conference fee). This card should not be used by one of the ministers – they can use their own card – and the invoice must immediately be sent to the church’s Finance Office as soon as it is received by email.

There is one and only one exception that I can think of and it is not very good. If a staff person needs a credit card for church work but cannot get one because his or her own credit is poor, then the church can intervene and get one. But, there is a big, huge red flag – if that person’s credit is that poor, there is a reason for that and do you really want someone with bad credit handling a church credit card? Think twice about that.

I know church credit cards can be positive. In the past two years I’ve gotten three (3) iPads for church staff using rewards points. But I also know that when you get credit cards, someone on staff will spend hours reconciling all the receipts to the card statements and entering the payment data. That is a lot of extra time that could be used more productively elsewhere in the church.

So, if you ignore my advice and do get church credit cards, you need to have a contract with the cardholders. This contract needs to be authorized and approved by the church’s Finance Committee, signed by the staff person, and placed in the employee’s personnel file in the Finance Office. This contract should have a “three strikes” provision: if someone with a church-issued card does not turn in his or her paperwork in a timely fashion (when requested by the Finance Office), then after the third event the card will be revoked for a specific time period (usually 3 or 6 months, sometimes indefinitely until the person appears before the Finance Committee or even the Personnel Committee).

The bottom line for me is about being good stewards of the church’s resources. A credit card is a privilege, not a right and staff people need to earn it, not expect it.

Lead On!
Steve

Filed Under: church administration, church finances Tagged: church administration, church finances

5th Gift Letter

Posted on November 20, 2012 Written by Steve Law

Every year a church should sent out gift letters (statements of contribution) five times a year. After each quarter AND the first week of December. That letter in early December may be a new thing to some church administrators, so let me explain why you should do it.

December is one of two times a year that people’s giving is heightened by society (tax filing season in April is the other time). A professional fundraiser once told me that he needs to work only two times a year, April and December, because those are the times when people are most inclined to give. The rest of the year he cultivates donors, and there are some good lessons in that for church administrators. Since people are already aware of the Christmas season of giving, leverage that awareness for the good of the church by sending out a statement of contribution.

Most people do not record during the year how much they’ve given to their church. They need reminders and a letter in early December is an easy way to let them know. Most people are not offended by such a letter, and a lot of people actually appreciate the reminder.

A gift letter in December pays for itself several times over. Yes, it costs money to send out the letter, but my experience is that the amount of money received is a lot more than it cost to send out the letter. Sending it out is very cost effective and beneficial to the church (and to the donor for tax purposes).

Send a gift letter out (with a cover letter) in early December and you won’t regret it; it will help you get in some year-end gifts that you might otherwise have not received.

Lead On!
Steve

Filed Under: church finances, generosity Tagged: church finances, generosity

Gift Letters or Statements of Contribution

Posted on November 14, 2012 Written by Steve Law

Gift letters (also knowing a statements of contribution) have several purposes:

To acknowledge and thank donors for their gifts
To ensure the church received the gifts and credited them to the correct fund
To give members a chance to see how much or how little they’ve given to their church
To provide an opportunity to the church to include a letter explaining to donors how their gifts were used and the people whose lives are being changed because of the generosity of the givers
To instill confidence by donors in the integrity of the church’s Finance Office so they can see that the staff is handling gifts accurately

Gift letters should have all of the following elements:

Name and address of the church or 501(c)(3).
Logo of the organization would be great, too.
Tax Identification Number of the organization. This is known as a TIN; sometimes it is called an EIN or FEIN (Employer Identification Number or Federal Employer Id Number)
Name and address of giver
List of checks which includes
- Date of gift
- Form of gift – check number, cash, online, or other description of manner of gift
- Amount of gift
- Purpose of gift – was it for the ministry budget, building, missions, etc.
(Pledge – if you use pledges, they should be on the letter, too)
Total of all the gifts by category and grand total
Thank you sentence from the Finance Office and who to contact if there are any errors
Sentence required by the IRS for tax-deductible gifts. Here is the one I use:
- For IRS purposes, I must inform you that the gifts contained in this letter are based on intangible religious benefits. You did not receive any goods or services from _____ Church for this contribution. Please keep this letter as documentation of your gift.

Every time you send out gift letters, you should be accomplishing all of the purposes listed above and your giving statements should have all of those elements. Anything less means you’re not getting as much value as you could.

Maximize the impact of your gift letters by including a cover letter which has several additional elements:

Paragraph 1 – several sentences thanking people for their generosity (please use that term – it doesn’t have any negative connotations and is viewed very positively by people; people like to be told they were generous)
Paragraphs 2, 3, and 4 – three brief stories that have happened at your church within the past 3 months where people were changed for the good because of what your church did, events that had an impact on children or youth such as a mission trip or Vacation Bible School, and/or activities that reached the community or world with the Good News of Christ. Tell stories – people remember stories; if parables were good enough for Jesus, they’re good enough for you, too!
Paragraph 5 – conclude the letter with another acknowledgement of their gifts and generosity. Also, mention who and how they should contact if there is an error in the giving statement.

Finally, how should you send them: I like sending them out by email because it is free. Society has trained people that email is normal, so use what society has taught people. For people without an email you’ll have to use snail mail. In a few instances, you’ll have to use snail mail for some situations where people’s giving needs to be kept confidential from another person in their home who has access to the family email – those are rare and sensitive, but you need to be aware of those. Snail mail costs about $1 for each letter (postage, envelope, paper, ink, and labor) whereas email costs just the labor (which you have to do anyway).

Lead On!
Steve

Filed Under: budget, church finances, church financial statements, communications Tagged: budget, church finances, church financial statements, communications

Financial Records Retention for Churches

Posted on October 26, 2012 Written by Steve Law

Records retention of financial data can get very complicated very quickly but I think it should be simple. I’ve studied different charts but it all can be divided into two categories: 7 years and permanent.

7 Years

Bank statements & reconciliations
Contribution records
Accounts payable records
Payroll detail
And other financial detail records

Permanently

Commercial insurance records and payments (property and workers’ comp)
W-2s, W-3s, 1099s, and 1096s
General Ledger detail
Monthly financial statements
And other big picture records

The short-term docs are kept mostly in case of a church or staff member being audited by the IRS; IRS audits can go back only 7 years maximum. Also, after 7 years, most financial info is considered “historical” and not relevant to the church’s current status.

The reason for keeping insurance docs forever is for legal purposes: if something comes up years later (child molestation or a building issue), you want to get the insurance company at the time of the incident to pay for and handle all the legal issues You need to keep a copy of the policy and payment of the bill to prove it was in effect. Other long-term docs are kept for legal and financial history; they are rarely consulted but it is a good way to keep financial history. There is no legal or financial reason to keep records of individual gifts beyond 7 years.

BTW, there is no permanent or long-term accepted standard for record-keeping. Right now the best way is on paper with an electronic backup in PDF format. Everyone is waiting on the Library of Congress to determine the definitive long-term storage but LoC is waiting on technology (which changes constantly). Until then, print things out (old-school) and have an electronic version (new school).

These docs need to be stored

In a climate controlled environment such as a closet
Above floor level so that rising water won’t damage them
Behind a secure door which is keyed differently than all other building keys
In boxes on shelves to make access in subsequent years easier
Together by fiscal year and all permanent records need to be stored together
And, the financial records storage closet can also be used to store items that just don’t fit in the finance office.

Each year, the oldest docs need to be shredded. I took the annual shredding chore and made it into an opportunity to help church members. I announced, especially to the senior adults, the day that shredding would happen and encouraged them to bring in old docs such as tax records and bank statements. The seniors were very grateful that the shredding could be done at no cost to them and it didn’t cost the church any extra either.

Shredding will cost less than $100 or you can see if your bank will shred your docs for you. Some businesses have “shredding parties” to draw new customers – take advantage of that even if you don’t become one of their customers.

Lead On!

Steve

Filed Under: church administration, church finances, church financial statements Tagged: church administration, church finances, church financial statements

Generosity Index

Posted on October 5, 2012 Written by Steve Law

You need to know about the annual Generosity Index which is an interesting measure (at least to us numbers geeks) of how generous people are. This link is to the 2011 publication of the 2009 tax data. The compilers gather data from the US Internal Revenue Service (Canada is in the survey but in this blog I’m referring only to the US). They gather data by state:

Total amount of income on all the tax docs filed
Total number of tax filers
Total number of tax filers that made a charitable contribution
Total amount given to charities

The data is sliced and diced in two primary ways: 1) percentage of total aggregate income given to charity and 2) amount of average charitable donation. Those two are merged to get the Generosity Index and then states are ranked by each of these.

It is interesting to see the number of tax filers in a specific state but we don’t know if these donors gave $10 or $10,000 so I prefer to look at the percentage of income that is given to charities. That percentage is very telling about those who are inclined to be generous with their money. BTW, by far the largest recipient of charitable dollars are churches – no one else comes close.

The most generous state is Utah whose residents give an average of 3.09% of all their income to charities. The second is Georgia whose tax filers give away 1.85% of their collective income. There is a big drop from #1 to #2 and that is due to the Mormon emphasis on tithing.
The top ten most generous states are
- 1. Utah
- 2. Georgia
- 3. Alabama
- 4. Maryland
- 5. South Carolina
- 6. Idaho
- 7. North Carolina
- 8. Oklahoma
- 9. Mississipp and New York (tie)
The top ten stingiest states are
- 41. Ohio
- 42. New Mexico
- 43. Arkansas
- 44. Hawaii
- 45. Rhode Island
- 46. West Virginia
- 47. New Hampshire and Vermont (tie)
- 49. Maine
- 50. North Dakota

Generalizations are rarely correct but there are interesting patterns

Many of the most generous states are seen to be very religious (Utah & Idaho with Latter-Day Saints; Georgia, Alabama, South Carolina, North Carolina, Mississippi with Baptists and Methodists).
Many of the most generous states are seen as some of the poorest states
Many of the stingiest states are in the Northeast: Rhode Island, New Hampshire, Vermont, and Maine which is an area of the US that is considered less religious
Is there a correlation between faith and generosity – it would seem so (if we are looking broadly).

Years ago I read that research by Empty Tomb, Inc. showed some interesting statistics:

In 1932 the average Christian gave 3.2% of his or her income to the church. This is at the depth of the Depression, when people had less to give than ever before as a nation. It was a very, very tough time for the US.
Just before the economic collapse of 2008, the average Christian was giving 2.3% of his income to charity. During one of the most prosperous economic times in the US, Christians were more stingy than during the Great Depression. The figure of 2.3% has steadily dropped since, which means Christians are giving even less.

You can draw your own conclusions from this information. Here are mine:

More money does not make you more generous.
Generosity comes from the heart, not the wallet.
Being poor (a relative term in our country when we compare ourselves to other countries) means you understand better than others the importance of helping others.
A person’s faith and religion plays a large role in his or her generosity.

Lead On!
Steve

Filed Under: budget, church finances, generosity, leadership Tagged: budget, church finances, generosity, leadership

Electronic Donations

Posted on July 31, 2012 Written by Steve Law

Making donations or gifts without using checks or cash is increasingly routine and within a few years will become the norm for many churches (but not all – some churches will fight this tooth and nail). There are a lot of ways to give electronically – let me list a few:

Bank Drafts
- Bank drafts have been around for a couple of decades or more. This is where you authorize your bank to send money to the bank account of an organization (either at your bank or even another bank). It is easy to do but the donor has little control over the situation and gets reports only from the bank statement or from the organization sending the donor a contribution statement. This system is okay, but antiquated.
- I work with a church that has been using this system for many years. Each month, almost 10% of their budget comes in this way. The fees are very low and the church gets most of the money, too.
Online Giving
- In the past 10-15 years online giving has become quite the rage – as it should be. Younger generations don’t carry cash or even plastic – they “keep” their money in their phones or other electronic devices. They want to be able to go to a website where they can readily and easily give money to the organization they wish to support. This is a very good way to support your church and every church should have an electronic giving portal.
- Credit card fees range from 2.30% to as high as 5% of the total gift and debit cards are typically much less. These fees should be considered part of the “cost of doing business.” In general, the easier it is for people to donate, the more people and the more donations will be received which will offset the fees. http://www.serviceu.com/ or http://www.e-giving.org/ are good companies that know churches and can provide solutions.
Giving Kiosk
- About 10 years ago the idea was born of a computer station in the lobby of the church where people could give by either swiping a credit card or going to a website to give money. This is very neat – Stu Baker with http://www.securegive.com/ can show anyone their product which was developed by his father, a pastor in Georgia.
- This kiosk provides great flexibility to the donor who can set up a one-time or recurring gift (just like in online giving), but it also gives the donor the option to swipe a credit or debit card by which means that personal data is transferred to the account and that makes it even easier for the donor. I very much like the idea of giving kiosks.
- A colleague of mine even dreamed up a “kiosk-lite” by finding an old computer and monitor, connecting them to the internet and programming the PC so that it would only stay on their churches E-giving website and never go anywhere else.
Texting Service
- After natural disasters like the earthquake in Haiti in 2011, several organizations advertised where people could text money. This is a very simple method for people to donate money to their favorite cause – the problem is that most of the organizations that coordinate these apps have amounts of $5 and $10 – nothing more. I’d like for there to be an “unlimited” category where people put in their own amounts. I read in June 2012 where they are exploring increasing the amount that can be given to $20 (this is negotiated with the cell phone companies).
- This is very convenient but it limits how generous people can be. If I want to give $100, I don’t want to tap my phone 10 times (at $10 per time) to give money. I very much like this concept, I just want it to be less restrictive.
QR Code
- A QR code is that square made up of hundreds of very small black and white squares. QR codes are free. What they do is to activate the web browser on a portable device (phone, tablet, etc.). Every QR code is linked to a specific website. Linking your QR code to your churches giving website allows people to navigate to that site immediately.
- A friend of mine created the QR code for his church and now places the QR image in every Sunday bulletin. As the offering is passed, people can pull out their smartphones, scan the code, and give as much as they want.
- This is ultimate flexibility – it puts the donor in total control of when, where, how much, and to what he or she is giving. People can take the document with the QR code and use it later or save the destination of the QR code for later referral.

Additional benefits to electronic giving:

There is the well-documented fact that online giving is pretty much impervious to Sundays where the church is closed due to weather (snow, hurricanes, etc.) and tithing declines due to vacations and holidays. The internet is never closed due to weather and it never takes a vacation or is sick.
What is less well-known is how much online giving will make it easier for people (guests and regular attendees) who want to give who don’t have cash or a check with them that Sunday. If they could, they would give – but they left their money at home. No one leaves home without their smartphone!
An insurance agent told me the church’s premium will decrease because of the reduced exposure since there is less cash on hand (fewer dollars that could be stolen). That is a good but hidden benefit!
Online giving is becoming the norm – society is teaching people how to buy things online and make them feel comfortable with it. Since the marketplace is already doing the education to/for church members, churches can piggyback on this and leverage this knowledge for the church’s benefit through its online giving.
Donors can keep track of their contributions themselves. People can see what they’ve given to and what they haven’t supported (yet). This will help the church’s Finance Office by having donors more informed and even be able to print out their own statements of contribution as they need.
It also makes it easy for the church to send an email to everyone who has donated online which can result in increased communication between the church and members, especially donors.
Also, it might help the Finance Office. Some online giving sites interface with church financial software so that online gifts can be imported directly to the member’s database. That will update the financial portion of a member’s record and help the church keep track of all contributions by that person.

There are lots of ways to leverage online giving. Wise churches will be looking at ways to maximize the number of ways to receive gifts and to make it easier for donors to give. If you make it hard, then you’ll be on hard times. Make it easy for people to give – use the KISS principle: “Keep It Simple, Stupid!”

Lead On!
Steve

Filed Under: church finances, church financial statements, generosity, young adults Tagged: church finances, church financial statements, generosity, young adults

How Much Debt Should a Church Have?

Posted on July 17, 2012 Written by Steve Law

Personally, I think church debt should be exactly like your homeowner’s debt: that ratio should never exceed 2 to 1. Yes, a bank will loan you 3 to 1 but you’ll be so strapped financially that you won’t have any disposable cash for doing anything else.

The ratio to the operating budget, my suggestion is 10% or less. Basic economics for a church with no debt:

building is about 20%
programming (including missions) is about 30%
staffing is about 50%

To pay your loan, you’ve got to take it out of one or all three of these. Most of your building costs are fixed (energy and maintenance). That leaves programming and staffing – if you cut those too much, you’ll have a great building with no one to lead and no one to follow.

Better to have programming at 25% and staffing at 45% with some growth than to cut to the bone at 20% programming and 40% staffing (which will kill your staff, too). You can grow out of debt, but that takes a lot of intentionality – that is hard when most pastors are trying to manage what they already have and can’t imagine taking on more in order to grow giving and attendance even more than they are already doing.
I’ve worked with some churches that have a 3 to 1 ratio (debt to annual budget), but they are hurting financially. And, their new building will be old and worn down long before the debt is paid off at their current rate. The appearance won’t attract new people, especially a younger generation.

My recommendation, get out of debt as soon as feasibly and fiscally possible. Debt is fine so long as it doesn’t become the boa constrictor that wraps around the church and kills it.

Lead On!
Steve

Filed Under: budget, church administration, church finances Tagged: budget, church administration, church finances

Reading List

Posted on June 26, 2012 Written by Steve Law

This is a list of some of my favorite reading materials for my profession: church business administration in no particular order. What’s on your list? Share it.

Books
- Me, Myself and Bob by Phil Vischer
- E-Myth Re-visited by Michael Gerber
- In Search of Excellence by Tom Peters
Magazines
- Fast Company
- Religious Product News
- Church Executive
- Peachtree Business Products catalog
- NACBA Ledger
- Harvard Business Review
- Christian Computing Magazine
- Today’s Facility Manager
- Church & Clergy Tax Update

Filed Under: church finances, church staff, leadership, wisdom Tagged: church finances, church staff, leadership, wisdom

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