The Church Answers Podcast

Not All Accountants Know Church and Ministry Accounting: An Interview with Steve Chaney

Thom interviews Steve Chaney, founder and CEO of Chaney and Associates, the premier CPA firm for churches of all sizes. It is often assumed that a CPA or a bookkeeper understands church and ministry accounting. That is not always the case. Steve and Thom discuss this issue that many church leaders fail to grasp.

Duration:: 13m
Broadcast on:: 22 May 2024
Audio Format:: mp3

Welcome to the Church Answers podcast presented by Chaney & Associates. Chaney & Associates are the accounting firm for the church. Now get ready for fast-paced insights on key issues affecting the local church today. We release three episodes each week, so make sure you've seen or heard them all. And now, here's the CEO of Church Answers, Tom Rayner. Sometimes you listeners or if you're a YouTube viewers may think you get a lot of rainarized a lot between Sam and me doing podcast or art doing his podcast and just doing more and more podcasts with us. Well, you may think you're going to get chaneyized a lot on these particular podcasts that we have because not only is our Chaney & Associates our sponsor, our ministry partner and you hear them on the front and back bumpers, but we have Steve Chaney, who is the Chaney of Chaney & Associates with us. It's really an honor to have the head dude, Steve, to come and talk to us about these things are so important to pastors, ministers, and to the local church. So welcome to you. Thank you so much, great to be with you today, Tom. All right, if you didn't hear the last episode, man, you need to go back. Steve had some nuggets that you can take and manage. It'll make you say, why have I not done this before? I'm not going to get too much into that, but go back and watch or listen to this one. Steve, in this particular episode, we're going to talk about not all accountants, no church and ministry accounting. Now, I'm going to give you a quick example. You'll identify with it right away. And then I'm going to pick up with how you have come into this world of working with churches and ministers. But I was talking to an accountant and I'll just leave that anonymous and I was talking about my 401k RMD, required minimal distribution and I'm taking it early. Don't have to take it now. I'm not 72 yet, but I'm taking it early because I'm trying to get as much out via housing allowance. Now, I'm not going to explain that to everybody because that's not the purpose of this bike, but he said, you can't do that. And that's it. Yeah, that's a, that's a rule for pastors and others who have housing allowance. My point in this is I'm able to take some of my distribution of retirement would normally be taxable and is not taxable because it is housing allowance. So you may comment on that, Steve, but I just want to, I want to hear how you got into this world of ministry and church finance. For sure. Well, I was actually a pianist at a very large church while I was a tax. Whoa, whoa, whoa, whoa. You play the piano too. Yeah. I was a pianist for 25 years at a very large church in Sacramento. That's how you met my wife. She was the oboe player and I was the pianist. My goodness. I didn't know that I thought I knew you well. My goodness. Yeah. Well, I played the piano when back in the day you actually had to be able to play the keyboard, the piano, the church church nowadays. I don't know. And I apologize for all the keyboard players out there. Y'all doing great. But anyways, I was the treasurer of this church. I was a tax manager at the Andersen and I was in these board meetings and all I got to hear all the time was how the senior pastor would say, man, I wish I had known that I would have made a different decision when he was talking about financial matters and things of this sort. And really what he was doing was he was running the running the church by the rear view mirror and even the side mirrors. I mean, it was just like all over the board. He was digging and dragging all over the place. And I just got this idea from what I was in in Arthur Andersen that they could start to outsource accounting. And this was a brand new thing back in those days. I'm a forefront, you know, early adopter to this as well as an entrepreneur and innovator in this area that work with the national office of the ICPA to help them on some things. And it's great. So ultimately the biggest stuff that I find in a church is process. They just don't know how to process information. They're stuck in the way of like, oh, we still do things in triplicate. We still print things off. We still have checks. We still have this and then they're getting the financial statements done 15 to 30 to 45 days later after the month in close and then they're like, we don't know how to reconcile credit cards in a timely fashion. We can't get receipts. Well, now everything that we do is literally iPhone web based app, right? Right. If you're not doing that and you don't have a process, I always say it's like this. You don't go to Chase Bank and you don't tell Chase Bank how you're going to do it a positive. They tell you how you're going to do it a positive, right? Right. And they say if you're going to be our customer, this is how you're going to do it, right? And that's how they can serve hundreds of millions of clients. That's how they can be the biggest bank in America. That's how when SBB bank goes bankrupt, they take part of it because they know how to process information and data and keep financial students. So what we do is we go into a church and we have a weekly close, right? So a lot of people go, how do you do this? We don't know how to get all this done. They're good accountants, right? They can do a bank rack. They can do pay bills. They can do payroll, but they don't know how to do it for a church and automate it. So then you keep the cost low. So we go into a church and, for example, a very large church and we say, $1.5 million a year, the first year, just because of people attrition, they resign, we don't replace, we replace with software, we replace with process. And can you imagine, or you go to a church and they go, I can't afford to have a kids pastor because my bookkeeper makes $60,000 a year. And I'm like, size your church, you should be spending like $10,000 to $15,000 a year in accounting. And here's how you do it because you're leveraging technology, right? You're leveraging process, but these accounts today don't even know this. So we had one person and I won't tell you the church because you probably would know who it is, but this person has all, you know, everybody gives online now, right? Mostly, right. And then that comes from one of the big four. Actually, back in those days, it was a big six because he had been the church for quite a while. And you're talking about accounting firms when you talk about clarify for our audience. Oh, yeah. Yeah. The big five that they used to call like, you know, arts, Anderson, KPMG, all those those things. So this account comes from one of those firms. He's literally taking all of the online giving and manually entering it into the software. And he says it takes him two weeks to get it all done every Sunday because it's a very large church. Well, literally on the phone call, I'm like, go to Google and I process and I go, does this software from my giving speak to this system sync? And then a matter of seconds, I forward in the URL and I say, did you know that your software that he's for online speaks to this? And I just sent you this. And he goes, do you know how much time you just saved me? Like literally 20 to 30 hours a week. Now this guy was extremely competent account, top of his game, right? But he wasn't thinking like, what's the process for how to do this? What's the, what's the idea to keep costume? So the idea of software as a service and, and what we do in collaborative stewardship is we bring that software to the church with the process and the knowledge to then lower the cost and burden of administration, but have real time information. So our idea is if the accountant is not giving real time information to the leadership of a church, we call it the four Rs, get the right information to the right person at the right time to make the right decision. Honestly, I don't know what they're doing because you have to have real time information. So what we tell pastors every Friday, if the process is working, you should have your financial statements available because all the bills are paid, all the bank works are done, all the deposits and payrolls uploaded, everything's done. So that's what you want to have done. The other thing that we see where accountants just sort of miss it sometimes is payroll. So, you know, how it's announced, you just talked about it is not taxable for organic income tax, but did you know it is taxable for self employment tax? Absolutely. They call it bill status, right? So what they do is they'll, some people set up payroll and they'll withhold FICA or Social Security Medicare on the regular portion of income for a pastor. Well, if you don't know that that's illegal, you can't do that. That's our fringe benefit. That's taxable to the minister and it could negate his house in allowance if he was ever audited. Well, that's a simple thing to fix in any payroll system I've ever worked with. And so we catch that a lot and we've actually had audits where and then people like will come to us to do their tax return or say, look at my return or I don't own any taxes. The manager will say, I've never paid taxes. Well, that's a red flag because if they don't like that a self employment tax, they're at least going to pay the 15.3% on self employment. So we get a lot of churches that come to us just because of the payroll taxes are messed up and a lot of churches will say you don't understand Steve. We're a tax exam. Well, that's the income tax. Yes. The payroll tax will apply to a church. They're just definitely nuances. There's actually some types of property taxes that apply to a church too. So we couldn't even find that too and just we find a lot of issues. And then a lot of times you get yourself in trouble. I'll give you one more quick example. Sure. You get a church and they say, um, I don't know where the money's going. And so I start to look to the check register and just start to like dissect it and I'll say, where's this $500 a month going? And all of a sudden the bookkeeper says, I don't know. We've been paying for that for 40 years. Well, it turned out it was an investment account to a life insurance that nobody ever knew that they had because somebody 40 years ago in a church set it up. So it's like they don't know what they're paying. They don't know why they're paying it. They don't even know what their balance sheet is. Most churches don't even have a balance sheet to find out what is a true asset versus what's a true expense or net assets. So this is what we find all the time. You started the example with a large church and how much money they could save. I want to bring up the point that you serve all size churches as well. You can save money for the small church, but you can certainly put in systems that are going to protect the pastor that wouldn't know it otherwise. Absolutely. We have a church plan start at $99 a month and that includes your software. So that's it $100 a month and then we support you through email base. We support tickets and all this. You can go up to payroll. You can do this. So let me just tell you in general, if you wanted to do full outsourcing of a county, right, still have a person there for coming to deposit, but full outsource with the CPA reviewing. It is literally about one to one and a half percent of your budget. So if you had a million dollars a year come in, your fee is about $10,000 a year to do full outsource accounting. You can't even hire a person minimum wage. You're going to pay them at least 25,000 to 30,000 a year. Right. In the state of California, now that's going up to $25 or $20 and then $25. So they're totally taking that market out and churches are like, can't afford it. Well, this is affordable and it's all software. Well, I want to encourage all of our churches that are part of the church transfers community to check out Chaney and associates as chaneyassociates.com. You can see the link in the show notes. I want to mention that. I also want to mention the everything church resource directory. One of the first companies that entered into the directory was Gessu, Chaney and associates. I think when I talked to Steve about going into the director, he was in Europe somewhere at the time, but we got it done. Folks, this is so incredibly important. These things, you won't know how important it is to you really need someone. Don't wait to make this type of change and do it now. It's not going to only save you money, but it's going to save you a lot of heartache and headache in the future. Steve, we got so many things we want to talk about. I could go on all day with these conversations we're having. We're going to talk about the issue of how you can help the financial secretary a little bit in the next episode. A lot of churches have financial secretaries or bookkeepers. They call them different names, but we're going to talk about that in the next episode. So thank you for being with us, my friend. What a joy. Thanks. My joy as well. It's always your listening to the church answers. Podcast is always sponsored by Chaney and associates. Once again, that's chaneyassociates.com or go to the show notes and see it. We got one more episode. If you listen to the first one and now this one, we still have one more to go. So get ready. It's already downloaded and it's waiting on you. We'll see you in the next episode. You have been listening to the church answers podcast presented by Chaney and associates. Chaney and associates are the accounting firm for the church. You need to focus on ministry. Chaney will focus on finances. Also, please subscribe and give a review to the church answers podcast on YouTube and on your favorite podcasting app. (upbeat music) [MUSIC PLAYING]