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Church Finances Part II: The Importance of Financial

Accounting for churches

You can also track your donations—how much you received, spent, and have left. Balance sheets are used to evaluate the financial health of an organization by showing the amount of assets it has, the amount of liabilities it owes, and the net assets or equity the organization has. It can also provide insight into the church’s liquidity, or its ability to meet its financial obligations.

Obtaining properly prepared financial statements is an accounting best practice for all businesses, including churches and other non-profits. Given the same scenario of having four checkbooks, the church has quadrupled the monthly work for the bookkeeper. The bookkeeper would have to reconcile all these checkbooks each month. Fund accounting software uses one checkbook and has multiple funds keeping the money separated within that one checkbook.

There are advantages and disadvantages to both options, and the right choice depends on the organization’s specific needs and circumstances. Church accounting software is an essential tool for managing the finances of a religious organization. Choosing the right software can make a significant difference in the efficiency and accuracy of accounting processes. When selecting church accounting software, there are several key factors to consider. As 501(C)(3) entities in the US, churches are subject to specific regulatory requirements that differentiate their accounting practices from other organizations. Churches must adhere to the Generally Accepted Accounting Principles (GAAP) for various documents and reports and comply with IRS regulations.

Send your donors yearly donation statement with thank you letters attached. A balance sheet is a financial statement that provides a snapshot of a company’s financial position at a specific point in time, including its assets, liabilities, and net assets. It is one of the three primary financial statements that a company will typically prepare along with the income statement and cash flow statement. Usability is important when selecting church accounting software because it affects the ease and efficiency with which the software can be used by church staff and volunteers. A software with good usability is user-friendly and easy to navigate, reducing the time and effort required to complete tasks and increasing productivity.

It provides a snapshot of an organization’s financial health at a specific point in time by presenting its assets, liabilities, and net assets. When you invest in a church accounting software solution, be sure you choose one that will account for the financial intricacies of the fund accounting system. While for-profits use income statements to describe the revenue earned at the company over a specific period of time, church accounting dictates that church organizations use a statement of activities instead. If your church only needs to keep track of income and expenses, its features are enough.

Statement of financial position vs. balance sheet

There’s an old adage about data entry that states “garbage in, garbage out”. When entering accounting transactions properly assigning the account is crucial. Having a wrong disbursement will mess up the reporting 100% of the time. Unlike horseshoes where close will gain you points, accounting transactions have no such leeway, it’s either right or wrong. Some creative accounting methods may not be illegal per se, but they fail to provide a “true and fair” overview of the organization’s finances.

Quicken’s most affordable plans are appropriate for churches because its expensive plans add primarily non-church features such as rental property reports. ACCOUNTS by Software4NonProfits is one of the top accounting software solutions crafted exclusively for the accounting needs of nonprofits. Embrace effortless financial management with a user-friendly Accounting for churches interface, specialized features, and dedicated customer support. Selecting the right church accounting software can be a significant asset to the financial management of religious organizations. By considering the listed factors, organizations can choose software that meets their specific needs and enables efficient and accurate accounting practices.

  • If you’re looking for a software with more accounting functionality, we recommend QuickBooks Online for a full suite.
  • A key difference between accounting for for-profit versus churches is the concept of fund accounting.
  • Church accounting software is a specialized software solution designed to help religious organizations efficiently manage their financial operations.
  • When you come back home you wouldn’t put the $10.00 in the gas or dining out envelope.
  • AccountEdge Pro is designed to be user-friendly and easy to navigate, allowing users to quickly and easily manage their finances and inventory.

You need a series of ledgers to describe the different uses for the money at the church. Even when restrictions aren’t placed on the contributions, they should all be reinvested back into making your organization better and more impactful. This ensures your organization is remaining respectful and responsible with the funds generously given to your church. Let’s start from the very beginning with a definition of church accounting. This will help make sure we’re all starting with the same foundations on the topic before diving deeper. Translated in 50+ languages, the ease of accounting makes Akaunting the favorite of small businesses worldwide.

Get more time for your flock with church accounting software

Caryl Ramsey has years of experience assisting in different aspects of bookkeeping, taxes, and customer service. She uses a variety of accounting software for setting up client information, reconciling accounts, coding expenses, running financial reports, and preparing tax returns. She is also experienced in setting up corporations with the State Corporation Commission and the IRS. When a for-profit business makes a sale of a good or a service, the revenue is added to a single general ledger and the ledger keeps track of all of the company’s financial transactions and balances itself.

You’ll also experience peace of mind of knowing your church’s information is backed-up and secure. Churches can use this feature to save time (and, so, money), eliminate late fees and error-proof their accounting. You can set rules to automate your church accounting such as rules to automate payments, categorize transactions and auto-charge cards for recurring transactions.

Bookkeeping for churches requires discretion- remember that giving information is sensitive in nature. You need administrative control over who can view contribution information and also who can enter or post gift information. When a person is reconciling the transactions within the accounting system to their bank statement, several irregularities can be corrected. A check written out for $120.00 but entered as $102.00, creates an $18.00 discrepancy. Automatic withdrawals- or EFT transactions could easily be missed along with bank interest and fees. To ensure accurate account balances, bank accounts must be reconciled.

Sometimes leaders get caught up in what they could do if they only had more money to help them do it. Realize there are many other churches out there, and all of them believe in their mission. Churches can designate these smaller ledgers according to restrictions, bite-sized budgets, and other allocations at the organization. Ultimately, these ledgers are then organized in a greater chart of accounts to keep everything organized. Because your church doesn’t sell goods or services, you need more than a single general ledger.

What should you look for in church accounting software?

While every software in our guide is worth using, we recommend Aplos because of its robust, flexible, and easy-to-use features for church accounting. If your church wants to focus more on the accounting side, we recommend QuickBooks Online or QuickBooks Premier Nonprofit. American congregations across the country receive around $74.5 billion per year collectively. The right church accounting software can make a world of difference when it comes to managing the finances of your organization.

FreshBooks’ award-winning customer support means you never struggle to get assistance. You can expect a live human to answer the phone within two seconds, then zero hold time. Before a human answers, there are no endless runarounds with prerecorded messages and requests to push different buttons. You can also seek support via live chat, webinars and a knowledge base. You can stuff your receipts into one of our Magic Envelopes (prepaid postage within the US). Use our receipt tracker + receipt scanner app (iPhone, iPad and Android) to snap a picture while on the go.

Storyteller, promoter, problem solver to churches of all sizes and shapes. John has traveled the world working with prominent non-profit ministries. He also serves on the board of directors for Dayspring International. Benkorp provides initial training & ongoing supportEnjoy all other the full-service items. Another example of an inappropriate account designation is when making a loan payment and the transaction debits an expense account and credits the checkbook. A transaction like this actually has three disbursements, the checkbook, an expense account, and a liability account.

Accounting for churches

For example, grant money could be designated for a scholarship program. If you’re keeping your financial information in a spreadsheet currently, it’s probably time to upgrade your system. Accounting software helps make the bookkeeping process easier and allows organizations to automate the reporting process.

Specialized Services for Church Accounting

Let’s use an example of processing a refund to see how easy it is to get a transaction wrong. Most of the time when depositing money into the bank account, a revenue account is used. A refund is money you had already spent, but are now receiving back, due to an overpayment or return. It’s important the organization does not overstate a revenue account because of a refund. Think of fund accounting more like each mission functioning as a separate company, with it’s own set of accounts.

Church Accounting Software Made Easy

The QuickBooks class feature makes tracking restricted funds manageable. Churches can set up a class for each program, department, fund, etc. and track income and expenses by that specific grouping. A statement of activities can then be generated to view income and expenses for each class. This is a powerful tool churches can utilize to ensure restricted funds are used appropriately. ZipBooks can be accessed from any device with an internet connection, making it easy for users to access their financial information from anywhere at any time.

When choosing accounting software, churches should first determine if the chosen software’s plans fit within their budget. The most affordable plan may not include all the features your church needs. Also, look to see if the chosen software offers a discount for churches and nonprofits. Quicken offers plans ranging from $4.99 per month to $9.99 per month (40 percent off during the current promotion), billed annually. Its $4.99-per-month Deluxe plan is a desktop app for Windows and Mac with a mobile companion for iOS or Android devices. Its free plan offers unlimited income and expense tracking, key reports such as Profit and Loss reports, the ability to add unlimited collaborators, cash flow tracking and an intuitive dashboard.


In addition to that, the software is also well known for its budgeting capabilities, that allow organizations to set and track budgets for individual funds or grants, and compare them to actual financial performance. From payroll services, to unlimited bank connections, online donation processing, and more, Wave has a variety of features to help you keep your church running smoothly and cost-effectively. Churches give the members of their community the faith, wisdom, and compassion to help create a better world. Let Wave accounting software help you manage the church finances so you can focus on your important work. The first step in how to do church bookkeeping is to acknowledge that the handling of church funds from beginning to end is an act of worship. Therefore, being a good steward to see that your church’s resources are properly managed and cared for (no matter if it’s for a large or small church bookkeeping) is a top priority.

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