6 Tips for Responsible Financial Management in Churches

April 17, 2020 - 7 minutes read

annual-report-203760_640Good stewardship with money requires more than just the best of intentions. You also need to have good skills in handling finances and a full understanding of compliance obligations – for example with the tax office and the ACNC (Australian Charities and Not-for-Profits Commission).

In this post we’ve outlined several ways to better manage money in churches or charities, but first we will explain not-for-profit financial principles.

Principles of financial managment in not-for-profits

Being a ‘not for profit’ does not mean the organisation cannot make a profit. What it does mean is that any profit cannot be drawn on but must instead be reinvested back into the organisation.

Profits or cash reserves are actually important for the continuation of the not-for-profit’s work. They can for example be used to meet commitments, deliver services, invest in new programs, fund events, meet unexpected costs and provide a buffer in case of loss of income. Reserves also help create financial stability for the organisation and may indicate good financial responsibility is happening.

However it’s always important to be focussed on using reserves in accordance with the organisation’s purpose and not to just stockpile money.

Here are the promised financial management tips:

1. Bookkeeping basics

Bookkeeping is essentially a method of categorising your finances. All financial transactions within a business or not-for-profit are split into one of several categories – these being revenue, expenditure, assets, liabilities, and equity (the net worth of the organisation).

Accurate and up-to-date bookkeeping enables you to check the financial health of your organisation. Without it, it could be easy to get way off-track with finances.

A small or simple organisation might be able to manage their bookkeeping manually or by using a spreadsheet. However for small to medium sized not-for-profits there are several affordable and very good accounting software packages on the market that can greatly simplify the process – such as XERO, MYOB, QuickBooks and Reckon. You also do not have to purchase these packages to use them but can subscribe for a monthly fee at the level you choose.

2. Financial controls

Strong financial controls help protect your funds against theft and fraud. This might include dual authorisations for all payments, use of secure passwords, and limiting access to electronic banking and cash.

Good cash handling procedures are also important to prevent theft and collusion. This includes segregation of duties and prompt banking of all cash. See our separate article on this for more information.

3. Projections and budgets

Setting income projections and budgets helps not only with managing money but also with goal setting and decision making. This process can be done by analysing historical financial patterns (if available) and doing conservative estimates for future revenue and for expenditures.

Actual figures should be regularly compared to budgets to identify major discrepancies and take corrective action where necessary.

4. Financial reports and reporting obligations

Financial reports such as Profit and Loss (income less expenditure) and Balance Sheet (net worth) help you form a picture of your organisation’s financial situation and health. Other useful reports include Cash Flow, Asset Register and outstanding debtors and creditors.

You will also need to report your finances to external organisations as below.


Small registered charities will need to complete an Annual Information Statement at the ACNC. This provides basic information about finances, activities, staff and volunteers. Lodging separate financial reports is optional but also encouraged.

Medium-sized and large charities (those with income over $250K) however must lodge separate audited financial reports with the ACNC along with their Annual Information Statement.


Not-for-profits with turnovers above $150K need to register for GST. If your organisation is registered for GST and / or it has paid employees, you will need to report regularly to the ATO. This includes:

  • GST reporting – collection and payment of GST is reported on the BAS (Business Activity Statement), usually lodged monthly or quarterly. Depending on the end GST value you may have to make a payment or you may receive a refund.
  • PAYG reporting – taxes withheld from gross wages must be submitted either on the BAS or through a separate report called the IAS (Income Activity Statement).

There may be other information you need to submit to the ATO. This should be checked with your accountant.

5. Financial audits

Generally speaking all medium and large not-for-profits must have their accounts professionally audited each year.

Financial audits are basically independent analyses of financial management within not-for-profits. Auditors might examine documents, review accounting procedures, track donated funds and make recommendations for changes and improvements.

Audits can be done by a member of your church or by an external auditing company. At CCI we recommend appointing external auditors as this ensures a more independent review, and it will also be covered by your insurance policy. To find out more see our previous post on this topic.

6. Insurance

Insurance cover is also an important part of managing of finances, in that it provides financial protection for risks and assets such as liabilities, buildings, contents, data and revenue. Our previous post outlines eight major risks for churches to address according to leading not-for-profit insurer Ansvar Insurance.

Additional information

The ACNC has a number of useful resources for managing money which can be read and downloaded from their website.

Churches of Christ Financial Services (CCFS) supplies a free finance handbook for members, designed to help treasurers and finance committees manage their responsibilities. This can be obtained from the CCFS website.

We have also written several articles on financial risk management for churches and charities covering fundraising, credit card fraud, cash handling and more.

In the meantime if you need to discuss your insurance policy, contact our team by phone or email.

Written by Tess