People call the fire department when there is an emergency. We kind of get the same thing. Pastors don’t call us when everything is going great. Leaders generally call when they lose a bookkeeper or because their financial reports are a mess. (BTW-feel free to call before things get critical!)
Churches depend heavily on bookkeepers and financial administrators to keep their finances organized and provide leadership with accurate information.
How do you know if they are doing it right?
There’s an important distinction between trusting your bookkeeper and verifying that the church’s financial records are accurate.
A bookkeeper can be a trustworthy person and still lack the training, experience, systems, or time necessary to maintain accurate financial records. Pastors and church boards don’t need to become accountants, but they should know how to recognize signs that something may be wrong.
Here are ten warning signs pastors should watch for.
1. Financial Reports Are Frequently Late
Church leadership should receive financial reports on a predictable schedule—typically monthly.
If you’re regularly hearing things like, “I haven’t finished reconciling everything yet,” or “I’ll get the reports to you next week,” there may be a larger problem.
An occasional delay happens. Consistently late reporting can indicate that the bookkeeping is behind, accounts aren’t being reconciled promptly, or the bookkeeper is overwhelmed.
Good sign: Monthly financial reports are delivered consistently and on time. Set a due date that gives you a couple of days to review reports before you submit them to your board. Reports should rarely be late.
2. Bank Accounts Aren’t Reconciled Every Month
One of the most basic accounting controls is reconciling the church’s bank accounts to its accounting records. You can’t confirm you books are correct without this practice.
Every bank and credit card account should generally be reconciled monthly. This process helps identify missing transactions, duplicate entries, incorrect amounts, outstanding checks, and potentially unauthorized transactions.
A pastor doesn’t need to perform the reconciliation, but someone in leadership should verify that it is happening.
Warning sign: The bookkeeper cannot quickly tell you the date each account was last reconciled.
3. The Bookkeeper Can’t Explain the Numbers
A competent bookkeeper should be able to explain what appears on the church’s financial statements.
Ask a few simple questions:
- Why were expenses higher this month?
- What makes up this balance?
- Why is this account negative?
- How much money is available in our designated funds?
- Are there any unusual transactions we should know about?
The bookkeeper may need to research an occasional question. That’s normal. But if basic questions routinely result in confusion or vague answers, leadership should investigate further.
4. There Are Large Amounts in “Uncategorized,” “Ask My Accountant,” or Miscellaneous Accounts
Temporary or miscellaneous accounts aren’t necessarily a problem. Transactions sometimes need to be parked temporarily while additional information is obtained.
The problem is when they stay there. Listing transactions here is an absolute last resort.
If thousands of dollars have accumulated in accounts such as Uncategorized Expense, Suspense, Miscellaneous, or Ask My Accountant, the financial statements may not accurately reflect how the church is spending its money.
These accounts should be reviewed and cleared regularly.
5. The Church Has No Reliable Way to Track Designated Funds
Churches frequently receive money designated for missions, building projects, benevolence, youth ministry, or other specific purposes.
Leadership should be able to answer a simple question:
How much money do we currently hold for each designated purpose?
If answering that question requires searching through spreadsheets, bank statements, offering records, and handwritten notes, the church may have a problem.
A good accounting system should make designated fund balances readily identifiable.
6. Payroll Problems Keep Appearing
Payroll mistakes deserve immediate attention.
Warning signs can include incorrect pay amounts, missed deductions, late payroll tax deposits, incorrect housing allowance treatment, employees repeatedly reporting errors, or payroll tax notices arriving from government agencies.
One mistake doesn’t necessarily mean the bookkeeper is incompetent. Repeated mistakes suggest that the church’s payroll processes need to be reviewed.
We find payroll errors in almost every church that asks for our help.
7. The Bookkeeper Resists Questions or Oversight
Good financial controls aren’t an accusation of dishonesty. They protect both the church and the bookkeeper.
Be cautious if someone becomes defensive when leadership asks to see reconciliations, bank statements, receipts, payroll records, or financial reports.
Statements such as “Don’t worry about it,” “I’ve always handled this,” or “You wouldn’t understand it anyway” shouldn’t end the conversation.
Healthy church finances should be transparent to the appropriate leaders.
8. The Balance Sheet Doesn’t Make Sense
Pastors often focus almost entirely on the income statement—how much came in and how much went out.
Don’t ignore the balance sheet.
Look for unusual items such as negative bank balances, old receivables, unexplained liabilities, negative designated fund balances, or accounts that haven’t changed in years.
You don’t have to understand every accounting term. In fact, asking “What does this number represent?” can be one of the most valuable financial questions a pastor asks.
9. The Church’s Bank Balance and Financial Reports Tell Very Different Stories
Having $100,000 in the bank doesn’t necessarily mean the church has $100,000 available to spend. Some of that cash may represent designated funds, outstanding checks, payroll obligations, or other liabilities.
At the same time, the accounting records shouldn’t be dramatically disconnected from reality.
Leadership should understand the relationship between cash in the bank, designated funds, liabilities, and funds actually available for operations.
If no one can explain that relationship, it’s time to dig deeper.
10. Only One Person Understands the Financial System
This may be the biggest warning sign of all.
If the bookkeeper suddenly resigned tomorrow, could anyone else access the accounting system, bank information, payroll records, passwords, reports, vendor information, and financial procedures?
This is the worst scenario for church bookkeeping. Imagine not being able to pay bills, run payroll, or understand your financials. Imagine having to involve the police or sue your bookkeeper for access.
Churches should never become completely dependent on one individual.
Good financial administration includes documented procedures, appropriate access for multiple authorized leaders, and internal controls that allow someone else to step in when necessary.
Ask for These Five Things Every Month
Pastors don’t need to become bookkeepers to provide financial oversight. A simple monthly review can go a long way.
At minimum, church leadership should regularly review:
- Balance Sheet – What does the church own, owe, and hold in cash?
- Budget vs. Actual Report – How does giving and spending compare with the approved budget?
- Income and Expense Statement – What came in and what was spent during the month?
- Designated Fund Balances – How much money is being held for restricted or designated purposes?
- Bank Reconciliation Status – Have all bank and credit card accounts been reconciled through the most recent month?
Pro-tip: I love looking at the bank and credit card statements too. You can clearly see how money is being spent on those documents.
You don’t have to personally prepare these reports. But you should expect them to be accurate, understandable, and available on time.
Trust Is Not an Internal Control
Churches are relational organizations, and pastors naturally want to trust the people serving alongside them. That trust is valuable.
But trust shouldn’t replace accountability.
Financial oversight isn’t about assuming that someone is stealing money. In many churches, inaccurate financial records are caused by something far less dramatic: inadequate training, outdated processes, insufficient time, poor accounting practices, or a well-meaning volunteer who has been asked to do more than they are equipped to handle.
The goal isn’t to catch your bookkeeper doing something wrong.
The goal is to create a financial system where everyone can be confident things are being done right.
When It’s Time for a Second Look
If several of these warning signs sound familiar, consider having an outside accounting professional review the church’s books. A fresh set of eyes can often identify problems quickly and recommend practical steps to bring the accounting records up to date.
Did you know that Your Church Admin does financial reviews for churches? Invite us to check your financial health!
Your Church Admin — We make ministry easier.