Generosity & Effective Church Financial Leadership

Generis Principal Jim Sheppard was interviewed on The Ministry Show by Chris Mavity on the subject of generosity and practical ways we as believers can be better stewards for the Kingdom.

Jim leads the conversation by answering the following key questions:

What is generosity?

Psalm 24:1, “The earth is the Lord’s, and everything in it, the world, and all who live in it.”  Jim explains that when we truly understand this scripture we begin to see that we’re called to hold everything we own with an open hand – not just our time and talents but also our treasures. A true understanding of generosity from a Biblical perspective should include financial giving but, unfortunately, many churches are ignoring this aspect of discipleship.

How can church leadership model generosity?

Churches that are learning and advancing in generosity are led by generous pastors and staff members. Preaching (from the pulpit), teaching (in a groups setting) and, importantly, modeling generosity are essential elements. Pastors and church staff must be givers themselves and should have a giving story. When this is absent, it leads to poor financial leadership and a lack of stewardship training for the congregation. When the pastor and church staff have a personal journey of giving, they are likely to make it a priority in developing it among their people. That is, to develop generosity as one of the marks of discipleship.

Jim states:

“The church is great about talking about ‘where’ the money goes but not enough about where the money ‘comes from’ – the heart of a devoted disciple. Churches have to get better at teaching stewardship as discipleship and less afraid of the pushback they might receive.”

What financial mistakes are churches making?

1. Lack of margin Jim states, “Many churches do not have enough margin to plan for the future and cover all of their needs.” There are two main factors contributing to that.
   1. Personnel costs are too large a percentage of the budget
   2. Building costs are too high, leading to mortgage indebtedness

Example:  If a church is spending 54% for personnel and 34% for buildings, that’s 90% of their total budget. This only allows for 10% of the remaining budget to go towards ministry. That is simply not enough margin to operate a church in a healthy financial manner.

2. Not tracking key metrics. Jim states, “Most churches understand their financials. However, many of those same churches have no idea what is happening in the giving data – the metrics behind the financials. How many first-time givers, how many givers are potentially lapsing, giver retention, per capita giving, giving concentration --- these are key metrics that churches should understand in cultivating generosity and planning their annual ministry budget.”

What are some key financial decisions that can lead to a healthier church?

Through Jim’s experience he recommends taking the following steps for financial success:

1. Project next year’s spending at 90% of what you took in last year. If you budget at 90% you will not spend more than you bring in and you will have room for flexibility and growth.
2. Consider a zero-based budget: Rather than using last year’s expenses as a base for planning, start over at zero in every category and build it from there. What do we really need and what can be cut? This helps to clean up your spending and dive deep into actually budgetary needs.

3. Outsource financial record keeping. In my opinion, churches with an annual operating budget of less than $1,000,000 should seriously consider outsourcing their accounting. The salary you are paying for a person to do this internally would be better used employing a company that does church financials all the time. They understand the reporting and the metrics and, many times, they can do it cheaper than you can do it internally. By using an outside company, you get a more sophisticated system and better checks and balances. In other words, you better protect yourself from the potential of internal misappropriation.

Two financial companies to consider: belaysolutions.com & simpledime.com

Chris Mavity concludes the second part of Jim Sheppard’s interview next week on The Ministry Show.

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