A panel of financial professionals — who serve churches every day in the areas of lending, banking, accounting and financial technology — offers practical insights and strategic guidance to help your ministries thrive.
Q: What’s one piece of advice you’d give to a new church administrator stepping into financial leadership?
Sandy McClure: Evaluate where you are before deciding where you want to lead. Get to know the people, the culture, the senior pastor, the board, the finance committee. Get ingrained and listen. As liaison between staff and the board, communication will be over half your job. Don’t rush to ‘fix’ things.
David Lee: If you’re new to the position, don’t feel like you have to figure everything out. Don’t feel like you know need to know everything.
One of the most valuable aspects of The Church Network is networking, right? Take advantage of the value TCN brings to administrators by collaborating together with other administrators who are walking this journey with you and with those who have gone before you.
Dan Mikes: I think those are all good points.
And I’d encourage a new administrator to review the church’s internal accounting procedures and make sure they’re in place in such a way that you can provide leadership with timely and well-informed assessments of your budget performance.
As a lender, we don’t need a CPA-prepared statement to make a loan. But we do want to know that net income ties to the balance sheet and the change in fund balance matches the year-over-year difference in net income — those kinds of things.
PREPARING TO BORROW
Q: Speaking of loans, how can churches prepare financially before seeking funding for a building project or renovation?
David Lee: I think we all — Dan, Jeremy and I — would say the same thing: have a conversation early with any of the experienced church lenders and try to identify how much you can afford. It’s no different than looking for a home and falling in love with it. You love the community, the builder, everything about it, but then realize you can’t afford it.
Talking with a church lender early will help your church right-size the budget, whether it’s an expansion, renovation or new construction project. Don’t put the cart before the horse in these situations.
Sandy McClure: It’s critical to have strong financials and be able to identify trends. Consistency in reporting is essential as it provides reliability from year-to-year. That’s something banks want to see.
Jeremy Moore: Yeah. And I would say, start to live as if you already have the loan you want. As you get ready to borrow that $10 million for the next project, go ahead and start putting money away. This will do two things: first, it shows the banks that you have the ability to make this payment on a monthly basis. It also has you starting to stockpile cash. So maybe you won’t need $10 million; maybe you’ll need $7 million or $8 million instead.
Denise Craig: Sure. I think sometimes people don’t realize the things that you actually need to share to apply for a loan. Like, how long has your pastor been there? If the pastor were to leave suddenly, is that a financial risk?
There are some aspects like this that don’t seem financial on the surface but may come up in conversations with the lender.
And you can always ask lenders: What will I need to have prepared for you? Getting that list before you even get started is important.
LONG-TERM PLANNING
Q: What trends are you seeing in how churches approach capital campaigns, reserve funds, or long-range planning?
Dan Mikes: Two types of fundraising are popular and common in recent years. First is the one-fund approach — typically a two-year pledge campaign which addresses every aspect of operations. We’ve seen this be successful in many instances, as it substantially raises core giving over those two years.
Then there’s the three-year capital pledge campaign where pledges are exclusively for property acquisition or a construction project. As a lender, this is easier to work with because in addition to the long-term loan we
can also make a short-term loan against those pledge receipts. Today, with the way construction costs have inflated, it sometimes takes both these elements to get the borrower where they want to be in terms of total borrowing capacity and project size.
Denise Craig: Michael, are you seeing anything from a software perspective on how churches are approaching their fundraising?
Michael Blanton: Yeah. The key thing that we see is folks looking to get better visibility and real-time information — everything from getting their data house in order to moving out of manual reporting. They want to be able to quickly produce answers around their overall capital structure and how well they’re set up.
From a budgeting and planning standpoint, it has been a tricky year for everybody, right? A lot of quick reactions from folks trying to figure out what to do next. So, from an immediate-planning perspective, the ability to nimbly plan has definitely been a big trend among the fastest-growing technologies for nonprofits, including churches.
BUDGETING TRENDS
Q: Have you observed any shifts in churches’ budgeting priorities over the past year? (e.g., areas being frozen, expanded, or reimagined)
Jeremy Moore: Something we’re certainly seeing in the Church and in the broader economy is the rich getting richer. The divide between the haves and the have-nots is widening.
Among churches, growth seems to be accelerating — in some instances, both numerically and financially. Meanwhile, on the other side, there are churches who are really struggling. For them, investing in updated budgeting software is pretty tricky when you’re struggling to figure out how to fix the roof. It’s something we’re monitoring.
Certainly, our average church client is quite large. It seems like the larger they are, you do get some economies of scale; they’re scaling up even faster. They’re starting to look more like middle market companies from a business and operations standpoint.
I don’t know that we’re ready to make any determinations of value surrounding that, but it’s real and something we’re watching.
Sandy McClure: As we talk with church clients, many are looking at giving trends and growing deeper with their people as well as taking the one-fund approach. Having worked in a church office, I like the one-fund approach and not the detail tracking of restricted funds.
We talked about it all the time in the church office: ‘robbing Peter to pay Paul’ when a new campaign started, but that’s not the case with one-fund. The church says, Always give above your tithes — but then you see it shift between funds. [Baker Tilly] developed a tool called Ministry Intelligence that digs deeper into those giving trends. In this economy, it’s important to be able to identify and reach out to people who need a pastoral touch. Monitoring the discipleship side is really important as you budget.
Also, Jeremy [Moore] is right: several big church clients are planting new campuses, while smaller churches are being absorbed by bigger churches and taking on their branding. We also see some larger churches fostering some smaller churches, which shows Christ. It’s really amazing.
Denise Craig: Yeah, it’s a Kingdom mindset for sure.
David Lee: This is such a critical piece of the puzzle because, ultimately, if ministry didn’t require money, then we wouldn’t be having this session. Unfortunately, it does.
Churches are leaning into campaigns not so much to fund just a project or an event where traditionally a campaign is perhaps two/three years, and you’re done. Instead, we’re seeing churches talk about not wanting to just raise money but raise disciples; the financial support comes as a byproduct of deepening people’s relationship with Christ. When that discipleship focus is there, everybody’s living with an open hand, resulting in an overall increase in generosity.
Denise Craig: That’s a great point. When someone is sitting in the pastor or church administrator seat, they have to somehow balance the practical, financial side with the spiritual discipleship side. There are so many scriptures about finances in the Bible. Sometimes it’s not what we want from people, it’s what we want for them — helping them learn what it means to live a life of generosity.
BORROWING PITFALLS
Q: What are some common pitfalls churches should avoid when borrowing or managing funds?
Dan Mikes: One thing I see in the marketplace that’s concerning — and I don’t think it’s the case with the other lenders on this call — is lenders allowing churches to allocate up to 40% of their core giving to annual debt service. I think that’s too much; we stop at 30%. You want the building to serve the ministry, not the ministry serving the building.
This can result in financial stress should interest rates increase later.
Another concern is, where are you placing your deposits? Is it in an institution that’s doing good things with those funds? Are your funds FDIC insured? With a non-bank lender, your money might not be insured, and it might not even be immediately available to you in a worst-case scenario. Consider what happened years ago at the Arizona Baptist Foundation. Do a Google search and you’ll see a very well-intentioned institution which ended up losing a lot of money for a lot of depositors.
Jeremy Moore: Something that we used to see a lot — then stopped seeing for a while — and are now seeing again is what I call ‘aggressive construction starts.’ People are trying to get ahead of the seemingly never-ending construction cost increases.
From our seat (and probably from every seat here), if you’re trying to get a loan from a bank or financial institution after you’ve already put shovels in the ground, it’s going to be challenging at best. Talk to the banks first before you start moving dirt.
David Lee: Yeah, I agree.
And I think Dan brings up a good point about the management of funds. If it’s my own personal finances, I’ll abide by my own risk tolerance, right?
As an administrator for a church, you are called to be a steward and manage what God has entrusted to you. One of the first things I did when I joined our finance team at my church was to help develop an Investment Policy Statement that aligned not only with the risk tolerance for our church but also was in alignment with our mission.
If your church doesn’t have an investment policy statement, you need to engage with financial professionals to make sure you have at least a general framework. If you’d like to see a copy of ours, I would love to share!
Denise Craig: Absolutely. And that’s the value in networking: you don’t have to recreate the wheel; you can learn from other people who’ve been there — who’ve done that and learned the hard way.
That’s exactly what policies are for, too: to put parameters in place to make decision-making easier. It’s almost like you’re pre-deciding what you’re going to do in some of those situations.
REPORTING & AUDITS
Q: What are some best practices for churches to streamline financial reporting and audits?
Michael Blanton: Obviously I’m a technology person, so I’m going to focus on the capabilities you have in place to do your reporting. The reality for most churches today is that a lot of that work is being done manually, regardless of church size. In fact, among high-growth churches, they’re only adding on to the manual reporting burden that’s already there.
So, I think it’s a good idea to really take a hard look at how much work you’re doing — manually — to produce some of the more meaningful reports that you’ll be managing against and producing for your board. Consider modern technology or other partners that can help you streamline those things.
To get started, look out ahead and understand the initiatives of the organization. How can you embed that more at the transaction level of how you do your accounting today? That’s really the starting point for having clean data that can enable systems to help you automate and get more streamlined reporting.
Denise Craig: Good advice. Having spreadsheets everywhere — even if you’re an Excel guru — probably isn’t the best idea.
Sandy McClure: This topic is where I ‘live’ daily. With reporting, churches are asking: Who do we need to talk to? Who’s the report for? Who’s using the information? Bankers want reporting differently than church leadership or auditors, so we encourage church clients to do ‘mini audits’ all year so they’re not stuck at year’s-end looking for approvals and reconciliations for their auditors.
If you have dashboards that let you prepare to comply with your bank covenants, then you won’t have to go back and recalculate when Jeremy [Moore], Dan [Mikes] or David [Lee] call and say, ‘What’s in this number?’ With a click, you’ve got that information.
Denise Craig: Right. Something that both Sandy [McClure] and Michael [Blanton] touched on is having a single point of information so that you can process reporting easier. That’s really important.
Jeremy, I think you were going to add something?
Jeremy Moore: Yes. As Sandy [McClure] was talking — and on most of the points made — I think it’s important that we talk about networking with peers. By ‘peer,’ I don’t necessarily mean another church in your denomination; it might actually be more valuable to interact with churches that are a similar size.
If a church is already using Sage, that tells you something about their financial sophistication versus a church that’s using Excel spreadsheets. And both of those tools have their place, right? Some churches don’t need Sage; but if you’re a church with $5 million in annual budget, there are going to be more commonalities with a similarly sized church.
TRANSPARENCY
Q: How much and what types of financial information should be shared with the board or congregation to ensure transparency?
Dan Mikes: We, as a lender, don’t have a requirement related to disclosure of financial details to congregants.
Personally, however, I think it’s wise to offer an annual meeting for donors. The bylaws of certain denominations actually require this, even if the level of detail varies.
At minimum, providing a high-level summary is a good idea. And certainly, it’s great to alert donors about potential upcoming challenges.
Jeremy Moore: Yeah, I’m definitely pro-transparency, personally. I really appreciate more information. I think a lot of donors my age and younger are looking for transparency from those they give to. Remember that you’re not just competing for these dollars with other churches; you’re competing with the college football program, the Salvation Army, Operation Christmas Child and everything else. So, donors — especially those donors with the capacity to give large amounts — are really going to be sensitive to that.
At a minimum, I’d encourage you to look at ECFA accreditation. It’s a great place to start, as they offer some tenets around transparency.
Sandy McClure: Provide information in charts and graphs as opposed to financial statements with numbers. Show donors what has been accomplished. How many are being fed from the food pantry? How many baptisms were performed? These are not financial numbers, but are life-changing numbers which are as important or more important to donors.
David Lee: The level of transparency that’s appropriate will vary depending upon the audience. You may not need to be communicating the same kind of information to the congregation that you are communicating to the board or finance committee. Remember that the information shared should help each audience make more informed decisions — especially as it relates to how effective the church is at fulfilling their mission.
I’ll share a quick story.
At the small church I attended during high school, following the collection of the offering in the basket, the senior pastor would — during the service — open the offering envelopes and read off the names of those who gave, and then the amount. I guess some would say that’s transparency and accountability, but perhaps not the most effective.
We need to keep in mind that how and what information we share with our donors will, many times, determine whether they feel compelled and committed to continue to give.
Michael Blanton: To piggyback on both these statements, what we see folks most commonly — from a technology perspective — is reporting for a church board. If you know one or two questions are most likely to be asked by the board, give them the ability to find those answers for themselves in your reporting.
Personally, I think all but the most forward-thinking churches aren’t effectively communicating the mission when they talk about transparency and financials. For example, I might be attending service regularly and when you talk about church financials, I’m literally just thinking about the sustainability of the church and how tithes are doing. These communications should be supported by the right balance of ministry metrics and financials.
Denise Craig: Sure, that’s great.
Also, with a decision-making body — depending on the governance of your church — we’ve got to make sure the financial statements are understandable in layman’s terms, because everybody will have a different level of financial astuteness.
OUTSOURCING ACCOUNTING
Q: Is there a case to be made for outsourcing church accounting in today’s economic climate?
Sandy McClure: There is — often due to staff turnover. Maybe the accounts payable person is retiring and they need somebody for three months until they hire. Or they’re losing three people to retirement. Should we outsource or hire?
It’s difficult to find qualified applicants with expertise in faith-based accounting. With outsourced accounting, you don’t have to worry about replacing and training new team members.
What’s frustrating is hearing, ‘We use X [for outsourced accounting], but we have to talk to five different people whenever we do anything related to housing allowance.’ If you outsource, find a provider who knows the faith-based arena. It’s important for funds reporting, audit prep — everything bankers want to see.
Those in the arena will work with other churches and see commonalities to provide recommendations on things like negotiating loan covenants.
Denise Craig: Anybody else seeing anything with outsourced accounting?
Dan Mikes: We’re definitely seeing an increase in outsourced accounting, but remember: if you end up borrowing, the bank will likely require a CPA review or audit. CPA independence rules dictate that a CPA cannot audit periods during which they were employed by the client in a financial reporting role. So, you may end up with two vendor relationships.
INTEREST RATES
Q: What should churches know about interest rates right now? And how might that impact decisions around saving, borrowing or investing?
Dan Mikes: We’re in a really unique period, from an economic cycle perspective. Historically, the yield curve only inverts 11% of the time. In other words, one-year and two-year U.S. Treasuries are paying more than a five-year U.S. Treasury, and both are paying less than a 10-year U.S. Treasury.
The reason is inflation; right now, it’s higher than we’d like to see. Consequently, investors want a real rate of return on their money — something above the rate of inflation.
The Federal Reserve is struggling with what to do. The complicating factor is a weakened labor market: lower job creation numbers and fewer people available in the labor force. Lowering interest rates could spur further inflation, which isn’t good for retired folks. If the government raises rates, it could cause an increase in unemployment. .
Remember that when the Fed makes an adjustment, the only immediate impact you’ll see is what you’re getting paid for your deposits. There’s a direct correlation.
The point is, the five- or 10-year borrowing rates could go in either direction. Ideally, what you want from a lender is an offer letter that ties your interest rate offer to a published index, like the five- or 10-year Treasury. This creates transparency. If a few months lag between the time you’re approved and the time you’re ready to break ground, at least you’ve got an independent view of what’s happening with the interest rate.
Jeremy Moore: I think Dan is fundamentally right. I’m seeing a lot of differing opinions and tensions on both sides trying to pull interest rates in one way or the other. Even short-term rates seem to be coming down, which will affect your savings rates and any floating rate you’ve got. Long-term rates are stable to up a little bit.
The mistake I’m seeing lately is that institutions — including churches — are waiting to borrow money because they think rates will go down. I think that’s a bad bet; I think the combination of all the uncertainty makes it unlikely.
Add to that the fact that construction costs a year from now are also likely to be higher than they are today, and the cost of waiting really can get expensive.
Sandy McClure: Are you seeing any interest rate swaps?
Jeremy Moore: Yeah, we’re still seeing a lot of that in the market. Depending on what your goals and objectives are, it might make sense. That’s a whole other talk for another day.
David Lee: What I’d suggest is shock-testing your loan. How would an additional 1% or 2% increase in your loan rate affect your budget? Could you manage that increase? If not, how would you adjust your budget? Here’s a simple way to think about this — a 1% increase for every $1 million on your loan will increase your interest expense $10,000 annually. Knowing this early may allow your church to adjust accordingly.
When building savings, the priorities of the ministry are going to supersede all other criteria. As you try to balance safety, liquidity and yield, your ministry’s funding needs should dictate the priorities. If you need access to capital, then regardless of what return you’re receiving in your deposits, liquidity and access are of utmost importance.
Overall, I think churches need to ensure their loan and investment decisions are in alignment with their church’s mission.
TECHNOLOGY & TOOLS
Q: How do you see technology shaping the future of church finance and administration, particularly AI?
Michael Blanton: AI is one of the most interesting things church leaders are thinking through right now, both in terms of philosophical and human impact. I definitely think it’s going to shape a lot of administrative activity moving forward.
Software in general has always been about automating processes to free up time for humans to do more strategic work. AI will be the same. It’ll probably do it in different ways. Today it’s being applied to things like error detection in finance and accounting systems.
I think AI will be really impactful for small church finance teams, many of whom don’t have deep accounting experience. How much easier might it be to interact with your systems if they’re pulling in AI? If they’re building reports using your questions and prompts in your natural language, or just chatting to the system, verbally, about what’s overdue right now in terms of invoices to vendor XYZ. You could be asking things like, What do I need to be concerned about regarding our cash flow over the next three weeks?
Those capabilities are pretty close to happening for Sage, and that’s exciting, especially for smaller church finance teams.
Sandy McClure: Even if you’re not ready to use AI, now is the time to start training yourself on how to ask the questions and write prompts. AI looks at trends, explains fluctuations, and gives your team members confidence as they investigate.
For instance, I found an instance that accumulated depreciation didn’t roll. Why not? Well, we found fraud. It took me four hours to dig into the 500 entities and figure it out, but it would be an easy catch for AI.
On the other hand, people have fed their policies into the system so AI can tell them if those policies are being followed. If no exceptions, it can auto-approve. My reaction was, whoa — because I like to be in control, to see people’s names, who approved what.
Using AI will be tolerance-based. It’s proving helpful, especially for analysis, in the church finance office.
Denise Craig: Yes, thank you for that, Sandy.
You know, I recently heard somebody say that many people are worried that AI will take their jobs. But the reality is that their jobs might be taken by people who are using AI whereas they aren’t.
To me, that’s the more probable reality.
CONTACTS:
Sandy McClure
Director — SIS NFP Vertical Lead
Baker Tilly
Jeremy Moore
Managing Director, Head of Religious Institution Banking
BMO Commercial Bank
Dan Mikes
Executive Vice President & Director
Faith Based Banking Division
Cass Commercial Bank
Michael Blanton
Industry Marketing: Nonprofit+Healthcare
Sage
Denise Craig
CEO
The Church Network
David Lee
Sr. Relationship Manager
Thrivent Church Financing
