How to Manage Church Finances During a Crisis

By Kristen Alexander

"I have set the Lord always before me. Because he is at my right hand, I will not be shaken." Psalm 16:8

It’s hard to be prepared for a crisis, especially like the one we’re facing now with the COVD-19 pandemic. Having faith in the face of fear is even more difficult without having the support you can get by going to church every week. Being that pillar of peace in the wake of a storm is more vital now than ever. Unfortunately, it can be difficult to continue to operate if your finances are not what they used to be because of the decline in physical attendance. 

Here is what you can do to have the funds you need to continue to be the light of Christ in your community.

Revise your budget

If you don’t have a budget, you need to create one as soon as possible. Having a budget will keep you in line financially and will be a helpful guide in times of need. Your budget needs to line up with your church or ministry’s mission. Know your sources of income and where they can be spent. Each organization can have a variety of expenses, but at StartCHURCH, our team of bookkeepers has found that most expenses fall into one of five categories for most ministries:

• Personnel
• Facilities
• Administration
• Ministries
• Outreach

Using these categories to break down where your funds are going is the first step to deciding what is most vital to your ministry. Analyzing what is essential to keeping your ministry going until your regular members are able to donate again is going to determine what you are able to do for your community in the midst of a crisis. 

Start with the basics, such as utilities and rent. Identify what is being spent in those areas and whether you qualify for any discounts or promotions. Limiting expenses to what is absolutely essential is very important right now.

If you already have a budget, see what can be cut back. What ministries or departments can be put on pause or can afford to restrict spending for now until income is regular again? This could mean waiting to start a new project or letting some staff go for now. I encourage you to take the time to pray about your finances and determine what needs to be done for the betterment of the organization. Seeing your finances laid out in front of you can be a way to hold yourself and your staff accountable for every dollar spent.

As important as it is to track and limit expenses, it is equally important to know how your income may be changing and what needs to be adjusted to account for that fluctuation. With the lack of cash coming in, you may see an increase in unusual donations. Let’s take a look at how to handle those now.

Random donations

There are specified ways to handle certain cash donations. Those include:

• Restricted donations. These are non-tax-deductible donations given by an individual or organization with specific intentions regarding how the money should be used. This money is given with expressed instructions to return it to the donor if it is not used for the intended purpose or to be released from restriction. In other words, the donation cannot be used for anything except what the donor intends for in this instance, but they can release it into a designated donation instead of getting a refund.
• Designated donations. These are tax-deductible offerings given by an individual or organization with the sentiment of what they would like the donation to be used on, but ultimately the decision rests with the organization.
• Unrestricted donations. These are tax-deductible offerings given by an individual or organization with no stipulations on where and how the money should be spent. 

In addition to cash donations, members may opt to donate items to your organization. Vehicles, equipment, instruments, buildings, you name it, and it has probably been given to an organization that is in need. The first thing to remember is that the organization cannot determine the item’s value. This is up to whoever prepares the individual’s taxes. A contemporaneous written acknowledgment must be given, detailing what the item is and the condition that it is in. That written acknowledgment will then be taken to the tax preparer and used to itemize the deduction on their tax return.

For items that are estimated to be worth more than five hundred dollars at the time of donation, Form 8283 must be filed with the IRS by the donor. You must also file Form 8283 if you have a group of similar items for which a total deduction of over $500 is claimed. A contemporaneous written acknowledgment should be issued to the donor.

To learn more about handling restricted donations or designated donations, check out our blog, “The Difference Between Restricted & Designated Offerings.”

Help when you need it most

All of these things can be helpful in providing requested information for the CARES Act and applying for any grants or loans in a way that is going to be of the most benefit to your organization. You may need to provide proof in order to qualify for any stimulus grants, so be prepared to offer financial reports that may have been prepared for your organization recently.

These financial reports will be more helpful in ever in determining where you are spending and what can be excluded or postponed. If you don’t have a bookkeeper providing those reports currently, our bookkeeping service can help you track your budget and expenses. Call us today at 877-494-4655 to get the financial reports you need to make these decisions and more.

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