Sometimes it is difficult to see the importance of financial statements when you are busy trying to run a church (or volunteer within it). However, financial accountability is important for churches (probably even more so than for your average organization). Accountability, responsibility, and being a good steward are all Christ-like attributes that should be reflected in your church’s finances.
Below are some more practical reasons about the importance of financial statements.
1. Perhaps the greatest reason for financial statements is that they help you manage the sacred donations to your church. Some members of your church are making great personal sacrifice in order to donate. Here's a short clip (less than a minute) that shows the story of the widow's mite.
Show respect for those who have sacrificed so much to give to your church by keeping good track of your finances.
2. Leaders within the church (the board members) use these financial statements to make decisions. If the statements are not properly kept, then the decisions being made might not be in the best interest of the church.
3. Your church has been granted tax-exempt status from the government. Just because your church is exempt from taxes, doesn’t mean it’s not held accountable by the government and by the community in which you serve. In fact, your nonprofit church might even be under more scrutiny (from both the government and the public) than the average for profit business because of its tax exempt status.
4. If your church ever wants to get a bank loan, then the bank is going to want to see the financial statements.
5. Members of the church or of the public may use the financial statements to decide if the church is being wise with its funds. These people are more likely to donate if they see that everything is in order and that funds are being used appropriately.
6. If your church ever wants to get a government grant, then the government is going to want to see these financial statements.
7. There are public watchdog groups that devote all their time, resources, and attention to finding nonprofit organizations (including churches) that aren’t accounting for and managing their finances correctly. These watchdog groups like to find problems and then report them to the media. Not exactly the type of exposure you want your church to receive.
Church Financial Statements
The required church financial statements are listed below:
- Statement of Financial Position (also known as the Balance Sheet)
- Statement of Activities (also known as the Income Statement)
- Statement of Cash Flows
- Statement of Functional Expenses (not required but often recommended)
- Notes to the Financial Statements
Does it take a lot of work to get these statements in order? Yes, but I'm hoping to be able to help you along the way.