Why is it important to have well prepared financial statements? And why do we need to know how to read and understand those financial statements as a non-financial person? Those are just some of the questions we will answer over the next few episodes.
Accuracy & Quality
“Having accurate financial information available is extremely important” says our guest. Some things he looks for as a banker are quality and accuracy. Also, do they make sense? Were they reviewed by the leadership?
Financial Statements also need to be easily readable by the non-financial person as well. As a church leader, you are basically trying to sell your congregation on the excellence of your ministry. That includes all the programs, the teaching, and financial management.
Even though the statements should be easy to understand, training is still of the utmost importance. Any church that has a lot of staff and/or volunteers involved needs to provide training. These individuals need to know what a good set of books looks like. And church accounting is different, so even financial-minded people might be confused.
When churches apply for a loan, this bank really looks for outside accountants that specialize in fund accounting, as well. Hmm…wonder where we could find one of those??
When you hire an outside consultant, most people will look at that as an expense, versus an investment. But with considerations for all the items you need to report on; like we already mentioned, the complexity of fund accounting; and just the things you don’t know you don’t know, are just some of the reasons to change the way you think. You are hiring experts and that is good news for your ministry, but it can’t be given away for free.
What Does a Bank Like to See?
So when your church does need to apply for that loan. Our host asks what kinds of things will help (or hurt)?
Here is what our guest had to say: First, assign enough importance on the fact that an outside firm is doing the books. Inhouse could be seen as a red flag.
Second, accuracy & consistency in the format. If the format is changing, that is another red flag. And they need to be current. If you waited three to four months to balance your personal bank account, you could be in trouble real fast. The same applies to the church. With the added concern of fraud. The bank our guest works for spends many Mondays just sifting through all the (caught) fraud that happened over the weekend.
Dr. Miller likes to ask the question, “Who is known to be a financial integrity leader in your community?” In all of the trainings we’ve provided over our 30 years of business, we’ve only had one person acknowledge their ministry was. Friends, this should not be the case for ministerial finances. We hope you will share these episodes with other ministry leaders, so we can be involved in raising the standard across ministry lines.
Our guest wraps up by saying: Don’t go it alone. Trust your financial partners. Bring in people that have those financial gifts. You don’t hire a worship pastor that can’t sing. Why would you try to do that with your financials?
“Don’t try to be the expert, if you’re not.” – Jim Lehman
The better we can communicate our finances, the more confidence people will have in leadership. If your church is struggling to produce accurate, timely financial statements, visit GoodFaithAccounting.com.
Join us next week as we continue our series on Reading and Understanding Financial Statements – the statements you should be getting and how to read them.
Special thanks to our guest, Jim Lehman, and our masters of all things Podcasting, Chris and Lauren Miller, for this first episode in our Understanding Financial Statements series.