To most, a healthy church means a growing congregation, a fruitful ministry, and positive community relationships. But there’s a logistical side to a thriving church, and it requires accurately managing the resources that keep the church operational.

Church bookkeeping is the process of gathering, organizing, and managing your church’s financial records. Depending on the size of your congregation and the complexity of your financial situation, the data included in your books can vary greatly.

Use this article as your bookkeeping checklist. Here, we’ll outline the financial information your books must include, as well as some tips for accurately recording it.

Charitable Contributions

Many churches rely on tithes and other charitable donations for their funding. However, there are a lot of details about these contributions (beyond the gift’s size) that are important to track in your bookkeeping records, such as:

  • The donor’s name
  • The donor’s contact information
  • The date your church received the gift
  • The method of payment (e.g., cash, check, credit card, etc.)
  • Any restrictions placed on the gift

The importance of these details is two-fold: they support financial compliance and donor stewardship.

On the compliance front, these records inform legally compliant donor receipts, as required by the IRS for gifts to churches with 501(c)(3) status. At the same time, these details can help your church understand the congregation’s giving patterns, honor their wishes as you use their contributions, and show proper gratitude. Giving this attention to your dedicated donors shows that you care and encourages them to continue giving in the future.

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Miscellaneous Sources of Income

Outside of traditional tithes and offerings, your church may generate other forms of income from various sources, such as:

  • Fundraising campaigns: Specific initiatives or events designed to generate funding for your church’s needs could include auctions, bake sales, or even targeted prospect research efforts to identify potential major donors.
  • Merchandise sales: Some (often larger) churches sell branded items like t-shirts, coffee mugs, or books written by church staff.
  • Registration fees: If your church hosts events, conferences, or ministry programs, you may charge admission fees. Often, these fees cover the cost of hosting the event, but you can use leftover funding for other purposes.
  • In-kind donations: Congregation and community members may donate goods to your church, such as supplies for your nursery or auction items for an upcoming fundraiser. Non-cash donations can also include free services, like pro bono legal work or marketing support.

Every church’s financial situation is unique, especially when it comes to revenue. Some revenue may even accrue on a case-by-case basis, such as renting one of your buildings to a local school as space for a one-time event.

To ensure your church’s bookkeeping records aren’t missing anything, it’s best to record all revenue as soon as you receive it. This way, your bookkeeper isn’t scrambling at the end of the year to remember every fundraising initiative you launched throughout the year. Additionally, it measures your financial situation in real-time, allowing you to budget more efficiently.

Expenses

Both the IRS and the members of your congregation place a high value on transparency, ensuring that your funds are used in accordance with your mission and legal obligations. That’s why your church’s financial records must capture a wide spectrum of operating and mission-related costs, including:

  • Property and facility costs are the necessary expenses to acquire, maintain, and operate the physical location of the church.
    • Examples: Mortgage payments, utilities, and maintenance
  • Programmatic costs cover your church’s ministry expenses.
  • Outreach-specific costs are funds directly allocated to fulfilling the church’s charitable and evangelistic purposes.
    • Examples: Mission trips and community service programs
  • Administrative and operational costs are the expenses necessary to run the church on a day-to-day basis.
    • Examples: Payroll, audio equipment for the worship team, and fees paid for professional services, like outsourced bookkeeping
  • Debt servicing includes all financial obligations your church has undertaken.
    • Examples: Outstanding credit card balances or short-term loans

When recording this data, be sure to keep all supporting documentation, such as receipts, invoices, vendor contracts, and bank statements. It can also be helpful to add brief notes about each transaction so that you remember the reason for the purchase. For example, a bank statement will only show that you spent $34.95 at the grocery store, but a note that you purchased snacks for your youth group’s game night can contextualize the expense.

Assets and Liabilities

Your church’s assets represent the resources available to fulfill your mission, while liabilities encompass all of your financial obligations. Maintaining an accurate inventory of both is critical for comprehensive financial reporting.

Assets could include:

  • Any property, including buildings or land, owned by your church
  • High-value equipment, such as audiovisual systems, musical instruments, and office furniture
  • Investments, such as stocks or endowments

Liabilities could include:

  • Outstanding mortgages or loans on property and assets
  • Accounts payable, such as unpaid vendor invoices and utility bills
  • Payroll liabilities, including taxes and wages earned but not yet disbursed
  • Deferred revenue, like registration fees for an event that hasn’t taken place yet

Once you’ve calculated your total assets and total liabilities, you can determine the church’s net worth by subtracting the latter from the former. This figure serves as a crucial barometer of the church’s long-term financial stability, especially when planning for future ministry expansion or weathering periods of economic uncertainty.

Bonus: How to Record Church Bookkeeping Data

Knowing what data to record is only half the battle. How you store and manage that information is key to maintaining your church’s financial health. According to Foundation Group’s church bookkeeping guide, there are a few best practices your church should follow to make the most of its financial data:

The best practices of church bookkeeping, which include hiring a church bookkeeper, using fund accounting, and investing in church bookkeeping software.
  • Hire a church bookkeeper: Entrusting bookkeeping tasks to a full-time team member or an outsourced professional ensures that your church’s recordkeeping receives the full attention of a qualified individual.
  • Use fund accounting: Separate funds into specific categories to ensure you allocate resources efficiently across your church’s various operations.
  • Invest in church bookkeeping software: Use digital bookkeeping software that integrates with any other platforms you use (like fundraising tools or online donation software) to automatically consolidate all of your financial data into one place.

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Effective church bookkeeping is a critical practice for maintaining the long-term health and integrity of your ministry. Review your church’s current bookkeeping practices and consult a professional bookkeeper for additional support.