Tag Archives: 117

Church Bookkeeping Software vs Church Accounting Software

Church Bookkeeping Software vs. Church Accounting Software

Is there a difference between bookkeeping and accounting? If so, what is it?

Businessdictionary.com Definitions

Bookkeeping:

The systematic recording of financial aspects of business transactions in appropriate books of account.

Accounting:

The practice and body of knowledge concerned primarily with:

1.    Methods for recording transactions
2.    Keeping financial records
3.    Performing internal audits
4.    Reporting and analyzing financial information to the management
5.    Advising on taxation matters

It is a systematic process of identifying, recording, measuring, classifying, verifying, summarizing, interpreting and communicating financial information. It reveals profit or loss for a given period, and the value and nature of a firm’s assets, liabilities and owners’ equity.

Accounting provides information on:

1.    The resources available to a firm
2.    The means employed to finance those resources
3.    The results achieved through their use

Summary

From the lengthy definition, it is obvious that accounting is somewhat more complex than bookkeeping. Basically, bookkeeping is the tedious task of entering the amounts and dates of revenue and expense transactions (i.e. contributions and purchases). Accounting is the bigger picture: an accounting system uses the bookkeeping information to create reports that can be used by decision-makers and for tax purposes.

Most church software applications accurately handle the bookkeeping part: tracking member donations and spending, even the printing or emailing contribution statements to members and generate giving total reports. Unfortunately, many of these applications fall short when it comes to the most important aspects of having accurate accounting records and providing the reports required by the Financial Accounting Standards Board. For more details, please read our post Fund Accounting Methods Compared.

Conclusion

All businesses, for profit or not, need accurate bookkeeping software to avoid negative consequences (e.g. fines, damaged reputation, having to close the business). These repercussions tend to be magnified for nonprofit organizations; they face losing their tax-exempt status, and the loss of credibility can prove to be devastating since the general public tends to hold churches and nonprofits to higher standards.

Icon Systems understands the value of accounting standards, and we make every effort possible to provide you with the tools necessary to ensure your church is in compliance with FASB guidelines. We even hired an outside CPA firm to certify our software, IconCMO, meets these standards!


The Secret to Affordable Church Payroll Software! (Part 1)

Payroll is one of the most difficult, time consuming, and costly administration tasks churches repeatedly encounter. Churches of all sizes are required to use “fund accounting” as described by the Financial Accounting Standards Board (FASB) guidelines. Fund accounting is a specialized way of accounting designed for non-profits; if you use this accounting method we recommend you read this informative interview with Nate at The Church Accounting Software Guide.

More often than not, Payroll + Fund Accounting = Confusion

FASB Reporting guidelines add to the difficulty, time, and costs already associated with payroll. For example, churches can use money in the General Fund and the Youth Fund to pay the Senior Pastor and Youth Pastor, respectively. Alternatively, both Pastors may be paid using money from the General Fund. On top of regular income, IRS reporting and taxes vary for items such as housing allowances and vehicle expenses. Paying church staff members can also prove to be tricky; reporting and taxes for hourly or salaried employees follow a completely different set of guidelines altogether. Payroll management also tends to get significantly more complicated for multisite organizations.

Payroll does NOT have to be time-consuming

The initial setup of a payroll system is expected to take some time; however, this task may be considered to be of lesser importance since it is not recurring. Completing the payroll for each pay period, on the other hand, needs to be fast and relatively simple. An effective, easy-to-use church payroll solution will substantially reduce the time needed for you to complete recurring payroll cycles, therefore lowering the overall costs associated with payroll. Evaluate your current payroll system by asking yourself these questions:

  1. How long does it take me to print employee paychecks?
  2. Can I pay tax liabilities to government agencies quickly and efficiently with only a few clicks of the mouse?
  3. Are the liability accounts automatically updated when I cut checks to make these payments?

*Making consistent entries to liability and expense accounts each pay cycle minimizes the likelihood of mistakes.

The Ultimate Cost-Saving Secret:

Systems that charge thousands of dollars for payroll essentially offer the same benefits and features as basic payroll software. Some of the expensive payroll systems do not even comply with fund accounting guidelines. The price of church payroll software is dependent on who enters the tax formulas, so find a package that requires the church to input the tax formulas. If your church leaders are willing to put in a few hours of work at the start, they can save the church hundreds if not thousands of dollars each year in payroll expenses.

Icon Systems has streamlined the recurring task of paying employees by incorporating payroll into the IconCMO fund accounting software system in order to reduce the difficulty, time, and high costs associated with church payroll administration!


6 Steps to Maintaining your Church Tax Exempt Status.

Lauren Hunter did a wonderful write up of what to look for in church software. Please read the full article. Below is just a summary of some of the information you will find.

Know what regulations pertain to churches and what organization creates them. Understand and know why you cannot keep balances in the revenue and expense accounts. Additionally, liabilities should not have fund balances because liabilities are money owed and not money the organization owns. Does church size matters when it comes to accuracy of church reporting or does the church have to report the financials at all?  There are two major repercussions of having bad financials. One is moral and the other is legal.  When an organization is out of compliance trust is lost in the community, which is the moral issue and is very hard to recover. The other is the church can lose its tax-exempt status and cannot claim to be a tax-exempt organization legally. Find out where to go to get more information. Tell us what you think.


Interview with Icon Systems at the Church Accounting Software Guide

Several of us at Icon Systems recently had the chance to be interviewed by the fine folks over at ChurchAccountingSoftwareGuide.com. We think you’ll find it well worth a read! As they wrote:

Why this Interview is a Must Read for Anyone Dealing with Church Management and Accounting

It answers (from a licensed Certified Public Accountant) some of the most common questions I get about church accounting:

  • Are there any special accounting standards our church needs to be following?
  • Can my church lose its tax-exempt status?
  • Are my current accounting reports in compliance with non-profit regulations and standards?
  • Is there a church accounting software program that can help me be in compliance with non-profit standards?
  • My church is small, do I need to worry about the accounting standards?

We also cover the general administrative challenges that churches face, some of the best accounting-related features in IconCMO, and have a detailed overview from our CPA about the federal fund accounting guidelines for churches and other non-profits.


Why the Church’s Financials should be Auditable?

Many churches try their best to do everything right and succeed every day in their mission(s). There is one area in the church that can be detrimental even if the best intentions were meant – the church’s books. Once a church loses the trust in the congregation and/or community their reputation as being a trustworthy organization is tarnished for a very long time. This is why using the proper accounting software, techniques, and having the right people are essential to ensure the church’s overall mission is not tarnished in anyway. Continue reading


IconCMO Reviewed by CPA firm

Icon Systems Inc felt it was important to have their software reviewed by an outside CPA firm to ensure we were delivering the most comprehensive software that is available today for churches. While there are many companies out there that tout their products are far more superior, few have actually been reviewed by 3rd party companies to see just how their software adheres to FASB regulations like the 95 and 117.

Continue reading


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