The rule of thumb is that a church needs just one bank account for its financial needs. If you have more than one account, you are incurring additional bank charges, taking up staff time to transfer funds and reconcile bank accounts, and constantly tracking all the changes and balances.
I recognize the concern over the FDIC cap of $250,000 but there is a way around that ceiling; see this post for that info. The CDARS program is a legal tool which can insure up to $50 million, and if you have even more than $1 million in a bank account, you should consider investing that in a way that has better returns than a bank.
I’ve seen organizations that didn’t have a cash flow problem, but prior church leaders were leery of exceeding the FDIC cap so they opened bank accounts—lots of them. One had nine accounts and another had an astounding 20 bank accounts (including three that were never on any financial statement). When one organization had an audit, the auditors spent scores of hours tracking funds flowing from one account to another, and that increased the audit cost by tens of thousands of dollars.
Another concern with multiple accounts is that it can make it easier to hide malfeasance by an employee. Tracking so many accounts is hard and if one is omitted from a financial statement, then after a while that account can be tapped by an employee for personal purposes. If you only have one bank account, it is pretty hard to leave it off the balance sheet!
I strongly encourage all organizations to have just one bank account. However, there are times when a church needs more than one account. When a church has cash flow issues, it struggles to make its regular payments, and its leadership doesn’t have the fiscal control to ensure they don’t spend too much, then there should be a second account. That second account will receive transfers from the main account and hold funds until those funds are needed for payroll, debt service, or other critical expenses.
Unless you have an incredibly good reason to have more than one account, please close all your excess accounts, save the church some money and time, and make your financial reporting more efficient and transparent.
Lead On!