13 Key Questions to Assess Your Church’s Financial Health

“Is my church financially healthy?”

If you are a church leader asking this question, you are not alone. There are some key questions that can help you determine a church’s financial health. While the following list is not exhaustive, answering these questions may provide an indication of whether the church is in a financially healthy position. 

Question #1: What is the three or five-year trajectory of undesignated giving?

Understanding the giving patterns and trajectories of the church are key to ensuring financial health. Undesignated giving are funds given without restriction or direction. These are the funds that will cover most of the church’s operating budget. While a single year increase is certainly something to celebrate, it must be taken in the context of a multi-year perspective. Review past three to five-years’ undesignated giving to understand the church’s true income situation.

Question #2: What is the three or five-year trajectory of per capita giving?

Per capita giving measures the amount given per person in the church. This number considers both attendance and giving. Per capita giving is calculated by dividing annual undesignated giving by the total average weekly attendance (from infants through adults) divided by fifty-two weeks.

Per capita giving = Total undesignated giving ÷ Average weekly attendance ÷ 52 weeks 

Granted, some churches saw per capita giving increase after the pandemic due to decreased attendance, not increased giving. So, it is important to explore the root causes of any significant shifts in per capita giving. 

Question #3: What is the three or five-year trajectory of the number of giving units? 

Giving units are groups of family members. As an example, a husband and wife are normally considered a single giving unit. This number does not consider the amount given but the level of financial participation in the church. Mapping the trajectory of the church’s giving units can reveal whether financial participation is increasing or decreasing.

Question #4: What percentage of givers are over 70 years old?

It is not uncommon for older church members to make up a significant portion of a church’s total giving. And while church leaders should be thankful for such faithful givers, they must also consider the dangers of relying on older givers. A church that relies too much on older givers is in a financially fragile position and should focus on raising up the next generation of generous disciples.

Question #5: Does the 80/20 principle apply to the church’s giving? 

For many churches, the 80/20 principle applies to their giving. Twenty percent of their members account for eighty percent of the total amount given. This doesn’t necessarily mean that only twenty percent are giving, which is why a church must pay attention to giving units. However, it does mean that a small group covers a large portion of the church’s budget. This can lead to a precarious position when one of these significant giving members leave. If a church finds itself reliant on a few givers, it may be wise to develop a financial action plan in the event one or some of these members leave. 

Question #6: Is the church able to pay bills on time?

The inability to pay bills on time is an obvious red flag that may indicate decreased giving, increased expenses, poor budgeting, or any combination of those three. Late payments are not only a financial problem but a public witness problem. Delayed payments poorly represent the church and Christ to a watching community.

Question #7: Is the church deferring maintenance? 

Church facilities do not improve over time—they fall apart. Church budgets should include facility maintenance for predictable and unpredictable repairs. Deferred maintenance only exacerbates facility issues. Rarely do the issues improve or become less costly to fix. Significant deferred maintenance could be a sign of financial distress.

Question #8: Is the church able to weather seasonal fluctuations?

Church giving and expenses fluctuate throughout the year. A church can find itself in a season where giving decreases and expenses increase. These seasonal fluctuations are usually predictable. An analysis of giving and expense patterns usually reveals common ups and downs. A church that regularly finds itself in financial distress during certain seasons may be the result of poor financial planning.

Question #9: Is the personnel budget too high (or too low)?

You will regularly hear that personnel expenses should not exceed fifty percent of a church’s budget. This guide is helpful. However, depending on a church’s life stage and context, these expenses may be higher or lower and still considered healthy. As an example, new churches tend to have a higher percentage of its budget going toward personnel because of lower fixed costs. At the same time, a church with personnel expenses below thirty-five percent may indicate the church is paying their staff too little or needs to hire more staff. Either problem can result in staff burnout.

Question #10: What does the debt situation look like?

While debt can be used for strategic purposes, debt can also crush a church. As a rule of thumb, total debt should not exceed more than two times the annual budget and debt payments should not consume more than twenty-five percent of the annual budget.

Question #11: Does the church have a three to six-month emergency fund?

An emergency fund does not demonstrate a lack of faith. An emergency fund demonstrates wisdom. Unforeseen financial events will occur. An air conditioning unit will go out. A roof will need significant repair. Emergency funds allow a church to respond quickly to these financial costs and protect the church from being one large expense away from disaster. 

Question #12: What percentage of the church’s budget is going toward ministry and missions?

Granted, the entire church’s operation supports the church’s ministry. Paying the electric bill is important to the church’s ministry. However, church leaders should pay careful attention to the amounts that fund ministries within the church and missions outside the church. 

Question #13: Does the church have an accountability and security mechanism in place?

Misappropriation of funds can occur at any church. Poor financial reporting can occur at any church. As stewards of the gifts given to God, churches should lead the way in financial accountability and security. A lack of proper accountability and security measures should be a concern for any church leader and member.

Financial health is not to be taken lightly by the church. For the local church, financial health is an issue of stewardship and community witness. As a church leader or lay leader, analyze your church’s financial health by using these thirteen questions as a starting point.