How many funds does your church have? Five? Ten? More than ten?

Let's face it: Many churches have overcomplicated their finances. Do you feel like your church is one of them?

Let's talk about church funds, how many are ideal, and how you can simplify your church's finances.

What Is a Fund?

The answer may seem obvious, but you would be surprised how many people I speak with who use "funds" to refer to different things!

In this article, I'm using "fund" to refer to restricted ministry balances. A church fund is money set aside for a specific ministry purpose that cannot be used for any other purpose (like paying utilities).

Examples of church funds are:

• Building Fund
• Benevolence Fund
• Missionary Fund

What are Church Designated Funds?

If a donor specifies their donation is to be used for a specific purpose (like supporting a visiting missionary or a scholarship for summer camp), then your accounting process needs to include setting that money aside in a unique fund so that it won't be used for any other purpose.

So should you add funds every time a donor writes something new on the memo line of their check? How many funds are too many funds?

How Many Funds Are Too Many?

I once attended a church that simplified its financial strategy.

This church was over 100 years old and had accumulated a few dozen funds in that time. As new ministries were started, the leadership started funds to manage them. However, by the time I arrived, many of those ministries had come to an end or were not as big as they once were. The finance committee concluded they needed to close some funds and consolidate them into other existing funds.

The process took much prayer and discussion, but the leadership could breathe easy once it was done because funds were made available, their finances were easier to manage and understand, and the members appreciated simple reports during business meetings.

Because they simplified their finances, they also improved their ability to steward the resources they had. They could more effectively prioritize expenses and ministry efforts when their money wasn't locked up in several irrelevant funds.

The Myth of Abundance

One common misconception in church finance is the belief that a larger budget with many funds equates to better financial health and management.

But here's the truth: More funds increase complexity and often create a heavier administrative burden. This complexity can obscure the church's financial picture, making it harder to make informed decisions.

More funds do not translate to more money or more ministry. It just creates more work for you to manage.

How Many Funds Should a Church Have?

The "ideal" number of funds for an average church doesn't have a definitive number, but a guiding principle is this:

This approach helps reduce administrative complexity and makes financial reporting easier to manage and understand for both church leadership and the congregation.

Most churches I work with (even large churches), do NOT have dozens of funds. In fact, most churches only have 5-7 funds to properly do their accounting.

If your church has more than 10 funds, you're likely are able to consolidate or eliminate a few.

Popular Funds Used by Churches

Whether you're starting from scratch or wanting to consolidate some of your funds, here are the 7 most common funds we see being used by church leaders:

1. General Fund: This is the primary fund used for the day-to-day operations of the church, including salaries, utilities, and routine maintenance.
2. Missions Fund: Many churches have a dedicated fund for supporting local and international missions work, including missionary support, missions trips, and outreach programs.
3. Building Fund: For churches that are saving for future building projects, renovations, or large repairs, a separate building fund can be helpful.
4. Benevolence Fund: This fund is used to assist members of the congregation and community in need, covering expenses like food, rent, and utilities in times of hardship.
5. Youth and Children’s Ministries Fund: Some churches opt to have a specific fund dedicated to the activities, education, and outreach of their youth and children's ministries.
6. Worship or Music Fund: This can cover expenses related to worship services, including AV or music equipment, communion supplies, and special event expenses.
7. Denomination Tithe Fund: This type of designated fund is specifically set aside to fulfill the church's commitment to supporting its wider denominational body, which can include contributions to denominational operations, missions, ministerial support, and other denomination-wide initiatives or programs.

Church Finance Pro Tip: Embrace Constraints

Operating with fewer funds can nudge your church toward innovation. Limitations could compel your church to prioritize spending, focusing on what truly matters.

Your church will find new ways to fulfill your mission without relying on extensive budgets. Smaller budgets facilitate increased accountability and transparency, as every expense is more visible and scrutinized.

Churches thriving under financial constraints often highlight a common theme: a return to simplicity and a focus on community engagement over material resources.

Simplify Your Church Budget and Stay on Mission

Simplifying the budgeting process can significantly improve your church’s financial health.

A streamlined budget focuses on essential expenses and minimizes unnecessary overhead, making it easier to understand and manage. It also cuts out all the fluff and helps your church stay laser-focused on your mission and vision.

Clearer Communication

A simplified budget is easier to explain and understand.

Fewer funds mean you have fewer expenses to justify, fewer committees to coordinate, and less to explain. And your members will quickly grasp the reports you share with them.

Improved Stewardship

As I shared earlier, simplifying finances makes stewarding your finances more efficient. Having less to manage gives you the clarity you need to know how to build a budget for your church that accomplishes your mission.

Building Resilience

I once chatted with a pastor who confessed his church was experiencing a low point in attendance and donations, leaving the church struggling to pay a few bills.

After asking a few questions about their history, I learned that the church has tens of thousands of dollars in the bank, enough to nearly finish their mortgage! But they couldn't use it because it had been donated toward a youth scholarship fund. That fund was part of a ministry the church once offered, but it faded after the leader who ran it moved to another state. So now they're sitting on a trove of cash that can't be used!

Consolidating funds would avoid this situation like in the example I gave earlier. Had that money been put into a youth ministry fund rather than a unique scholarship fund, the money could have been used by the youth ministry. For now, it sits unused.

By maintaining lean budgets and avoiding overextension, churches can better withstand financial downturns and unexpected expenses. A simplified financial strategy encourages the development of reserves and contingency plans, so the church continues its mission even during tough times.

How to Simplify Your Church Finances

Review your ministry funds and consider eliminating or consolidating a few of them. Aim to reduce your overall number of funds to fewer than 10.

This is also a great time to assess your income and expenses. Because your expenses are tied to your funds, you may need to restructure how you record them. You never know, you could unearth some inefficiencies and unnecessary expenses, saving your church money!

Also, don't forget to communicate everything with your members and donors. Some may continue donating toward a defunct fund or ministry unless you share what changes you are making. This will help everyone stay on board with your church's efforts.

Church Funds Management Simplified

By embracing simplicity, transparency, and stewardship, your church can enhance its financial health and focus on its core mission.

Re-evaluate your current financial practices today. You may find that having fewer funds not only simplifies financial management but also enhances your church’s communal life and mission.

Matt Church Engagement