Churches are spiritual institutions but financial entities too. By combining good financial stewardship with an understanding of churches’ unique dynamics, financial professionals can improve transparency, sustainability and strategic decision-making, benefitting churches’ ultimate spiritual goals.
The financial activities of churches – particularly pentecostal and evangelical – are varied and complex, ranging from donation and investment management to budgeting, compliance, achieving mission-driven goals and acting as an informal insurer. Unlike many other non-profits, churches have income streams predominantly made up of voluntary contributions, a governance regime that often includes clergy plus members of the congregation, and automatic tax-exempt status (reducing the attractiveness of borrowing).
Church leaders may overestimate their financial expertise
These characteristics shape how churches manage money, make investment decisions and interact with their members financially, and they make church finance a unique field. Successful finance professionals in the sector need to have adaptability as well as a coherent framework that integrates spiritual values with financial stewardship.
Behaviour patterns
To manage a church’s income streams better, it is important to be aware of the behavioural patterns that influence congregational giving and leadership decisions. They include the following:
- Church members may give more during crises or times of financial need. A fundraising campaign to save a church from closure, for example, may be more effective than one promoting future growth.
- Donors mentally separate their money into categories and give accordingly. Fundraising appeals – building fund, missions, welfare, general operations – should be tailored to suit.
- If people see fellow congregants giving, they are more likely to give, too. Public acknowledgment and community-driven campaigns can boost participation.
- People give because it feels good or aligns with their values, so fundraising efforts should emphasise the emotional and spiritual rewards.
- Church leaders may overestimate their financial expertise, leading to risky decisions. External audits, realistic budgeting and financial oversight should all be encouraged.
Professional tools
Accountants can employ a number of traditional budgeting, investment and governance tools to help churches address their unique issues.
Exploiting the time value of money (money today is worth more than money tomorrow) will underpin a more effective evaluation of the timing of investments and fundraising. For example, early donations for a building project can be invested to grow over time. Professional asset managers can be used to manage risk and optimise returns by diversifying any investment funds. Capital asset pricing models can help guide investment decisions.
Implementing cashflow control measures is also important, especially during times of uncertainty. By setting upper and lower limits for cash balances, with a return point in between (the Miller-Orr model), it is possible to manage the uncertainty better.
Regular reporting will let church leaders manage resources better
Using Miller-Orr will help churches avoid both cash shortages and idle funds, ensuring liquidity while maximising stewardship. In simple terms, it works as follows: if cash goes above an upper limit, the excess should be invested; and if cash drops below the lower limit, church investments should be liquidated to restore the balance. The return point is the ideal balance to aim for after any adjustment.
Finally, establishing a finance committee and a regular system of reporting will enable church leaders to manage resources better. Transparency and accountability are essential.
Insurance
The informal insurance role of churches during crises – covering everything from direct financial assistance and community fundraising for medical bills, funerals or school fees, to access to networks that facilitate employment, housing or business opportunities – has many practical implications for good financial management.
Finance professionals will need to consider budgeting (planning for emergency support needs), transparency (clear policies on financial assistance to build trust and reduce perceptions of favouritism), data collection (tracking giving patterns and support requests can inform strategic planning) and collaboration (possible partnerships with micro-insurance providers or community savings groups).
Mission-driven
Applying conventional finance models to church management offers benefits but requires careful adaptation and sensitivity from accountants. For example, churches’ primary objectives are often spiritual growth, community service, evangelism and discipleship, and financial decisions are often made to advance goals such as subsidising outreach programmes, supporting missionaries or maintaining sacred spaces.
Financial tools such as net present value may be less relevant
Tools such as net present value or internal rate of return may therefore be less relevant or require reinterpretation. For example, a church may wish to invest in a community centre that yields no financial return but fulfils a vital social and spiritual purpose. And the spiritual dimension of giving – where donors expect divine rather than material returns – challenges conventional accounting assumptions about utility and rationality.
Churches’ financial decisions also reflect theological convictions and ethical standards rather than commercial goals. Often, there is a desire to avoid investments in industries that conflict with church values (eg gambling or alcohol), while investee businesses will be expected to offer staff fair compensation for their work.
The relationship between principals and agents – congregants and church leaders – is trust-based, and financial stewardship is not just a fiduciary duty but a spiritual responsibility. The zero-leverage policy adopted by many churches is not merely a financial strategy but a theological stance.
Constraints
Finance professionals also need to be aware that there is diversity between denominations, with varying governance structures, financial practices and attitudes towards money. What works in one denomination or cultural context may be inappropriate or ineffective in another.
Budgeting may be informal and record-keeping inconsistent
Many churches lack the financial infrastructure to implement sophisticated models. Budgeting may be informal, record-keeping inconsistent and financial literacy limited. This creates barriers to adopting tools such as the Miller-Orr cash management model or portfolio optimisation strategies.
Bridging this gap will require capacity building, training and the adoption of user-friendly financial technologies. Accountants and financial advisers working with churches must be prepared to educate, contextualise and simplify complex concepts.
This is not just about money. It is about mission, trust and the faithful management of what has been entrusted. Financial transparency builds credibility. Strategic planning ensures sustainability. And ethical decision-making reflects the values that churches seek to embody.
Takeaways for practitioners
- Understand the psychological drivers of giving: recognise that donors are influenced by emotion, community and spiritual beliefs.
- Apply financial principles with sensitivity to mission and values: adapt models to reflect theological convictions and ethical standards.
- Use models and metrics to guide decision-making: employ tools like the Miller-Orr model, capital asset pricing models and agency theory where appropriate.
- Promote transparency and accountability: establish governance structures and reporting mechanisms that build trust.
- Embrace technology for cash and investment management: use digital platforms to streamline operations and enhance oversight.
