Tag Archives: church accounting

Church Software for Districts and its Churches.

The evaluation of district software for churches should take into account the various tasks performed at each level of the organization (e.g. Church, District, Regional, National, World Offices).

Capabilities of District Software:

  1. The ability to move a church from one regional office to another.
  2. Communication capabilities both within a single entity as well as between each entity throughout the organization.
  3. Communication is based on roles within the organization – e.g. regional secretaries versus church secretaries.
  4. Adding church plants or multisite campuses.

Using one software system throughout the organization helps simplify day-to-day operations

If the software is capable of handling data for individual churches as well as multi-site organizations, users do not have to learn more than one system and data entry is more consistent. The use of a single system throughout the district also allows each church to uniquely structure its own chart of accounts, contribution funds, etc. while allowing the district office to combine the data from each church into one consolidated report.

For example, a district office could collect the membership data from each individual church and consolidate it into one report to analyze the organization as a whole. An individual church would also be able to track several youth or memorial funds that would show as one youth or memorial fund total on the district office reports. The ability to customize separate structures for both levels is crucial.

Why is all this important?

First, the software needs to tackle head-on the various issues each entity is facing at their respective levels. Having one system reduces errors in reporting, ensures a high level of data integrity, increases speed in data gathering, and prevents the users from having to learn and manage five different systems.

We will use an orchestra to illustrate this concept: if each musician was playing a different musical composition would you expect a well-tuned concert? Certainly not – all the musicians have to be on the same page of the same song. The same is true when it comes to the technology used in churches and throughout the entire organization – shouldn’t the same software be used so your ministry can operate in-sync like an orchestra?

Second, providing data to the district office gives an early indication if certain churches will need help financially or within their ministry staff. It can help to determine which entities are flourishing with donations or declining. Is attendance increasing at one location but not the other? All of these and many more questions are answered objectively with the right software in place.

Third, with a one-system approach, confidentiality across the platform is essential so one church cannot view another church’s records. The system must also allow churches to opt out of sending data to the district office. Most district software packages fail in one or more of these areas: membership, financials, data gathering and confidentiality. But you can rest assured because there is an answer for district offices → IconCMO+ software!

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Fund Accounting Methods Compared.

Accounting for churches is radically different than accounting for for-profit businesses, or at least it should be. The Financial Accounting Standards Board (FASB: http://www.fasb.org) has defined how accounting for a non-profit organization differs from a for-profit organization. Icon Systems has gone to great lengths in designing IconCMO to follow these guidelines in order to be compliant with all government regulations. Following these guidelines also provides churches the reports they need to effectively manage their organization. We’ll try and define some of the methods companies are using today and their benefits and faults. Before we do so, we need to change some of the terminology.

o        Income Statement is defined as Statement of Activities

o        Balance Sheet is defined as Statement of Financial Position

o        Owner’s Equity changes to Net Assets

o        Income accounts are defined as Revenue accounts.

After reviewing different church accounting software systems some common practices have arisen.

Use Revenues and Expenses to track your Funds.

When using this method and you want to start a Capital Campaign drive, it would involve creating a Capital Campaign Revenue account and a Capital Campaign Expense account. While at first this seems like a good method you quickly realize that a single revenue/expense account on each side will not help the church board understand where the money was raised or how it was spent.  This method creates headaches for the accountant that now needs a complete set of accounts defined for each fund which creates a bloated chart of accounts.

Use Liabilities to track your Funds

This involves adding a liability account for each fund that you manage. If the church has received “X” dollars that is earmarked for Hunger Relief, the money would go into the Hunger Relief liability. Once entered it is easy to see how much money is owed to the hunger relief. When money is spent against this fund, the Hunger Relief liability is reduced until it returns to zero. Unfortunately at the end of the year the church board doesn’t know how much revenue was generated for the hunger relief fund or what expenses were incurred by it. While these hurdles could be overcome with some manipulation in the revenue and expense accounts it would be difficult/impossible to view a Statement of Activities and know why money was spent on specific items.

Additionally, a General Fund that is defined as a liability account would appear to the church board as money owed. Incorrectly defining funds as liabilities will not provide an accurate Statement of Financial Position. Without the ability to see what the true balance is, the church board will not be able to make informed decisions for the organization’s mission.

Conclusion:

While both of these methods provide the basic needs for a church, they lack the ability to report needed information to manage a church effectively. Borrowing money from one fund to help another fund becomes difficult to track. Neither method will inform the church of how much money that is currently in the checking account belongs to which funds. A church could write a check and not realize until later that the money was earmarked for Hunger Relief. Neither method will provide a Change in Net Assets report. Neither method will provide a Statement of Activities or Statement of Financial Position strictly for one particular fund. These are all required by FASB for any non-profit regardless of their size.

Fund Accounting:  A Better Method

IconCMO has deviated from the prior two methods mentioned above to be compliant with FASB. Funds are no longer defined inside the chart of accounts but rather separately. Each fund can be defined as Unrestricted, Restricted and Temporarily Restricted. Each fund can use the entire chart of accounts. The only requirement is that every transaction “must” have a “fund” designation. Because of this change a person can review the checkbook and see that of the $5,000 they have in the checkbook , $3,000 belongs to the General Fund, $1,000 belongs to World Hunger and $1,000 belongs to the Capital Campaign. Now a church no longer needs multiple checking accounts, spread sheets, or other creative accounting methods to know how much money belongs to each fund.  Because of this method, IconCMO now has the ability to extract data specific to a fund.  It can easily create usable Statement of Activities and Statement of Financial Positions specific to one fund or print a Change in Net Assets report that displays the monetary change for all funds over a given date specified.  It’s simply a better way to do church accounting and manage your finances.


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