Church accounting is a specialized form of nonprofit accounting that records and tracks the revenue collected, expenditures incurred, assets purchased, and liabilities incurred for churches and their related entities.
For over two decades, our team has focused exclusively on serving churches and religious nonprofits, developing deep expertise in their unique financial management needs. In this post, we’ll explore how proper accounting practices can strengthen your church’s financial management and decision-making capabilities.
The Value of Church Accounting
“Churches are actually one of the least regulated entities from an accounting standpoint,” our experts explain. However, maintaining accurate financial records is crucial for effective ministry management. Having good accounting enables churches to:
- Make informed decisions about capital projects
- Plan and execute community outreach initiatives
- Manage departmental spending effectively
- Track and allocate mission resources
- Steward congregation resources responsibly
As our team notes, “If they know when and how they’re spending their resources that they’re stewarding for the congregation, they’re able to make more informed and more immediate decisions than if they didn’t have quality, up-to-date accounting records.”
Essential Financial Documents and Reporting
Standard Monthly Reports:
Our team produces two core financial statements for every client:
- Statement of Financial Position (balance sheet in layman’s terms)
- Statement of Activities (income statement)
Customized Reporting:
Beyond these standard documents, we partner with each client to construct specialized reports they find useful internally. “We use the accounting system to inform those reports so that they have useful information that allows them to steer the ship,” our experts say.
Tax Documentation:
- 1099s are produced by our accounting team for clients who don’t use our payroll service
- W-2s are handled by our payroll team
- For clients using both services, we coordinate to ensure comprehensive coverage
Understanding Fund Accounting
While not necessarily considered a best practice, fund accounting is a common approach that offers valuable benefits for many churches. As our team explains, “Fund accounting allows the church to view fragmented accounting segments – you could use the word ‘department’ instead, or in QuickBooks, they use the term ‘class.'”
This approach enables churches to:
- Produce income statements and balance sheets for individual funds
- Track cash balances by ministry area
- Monitor receivables and payables by department
- Generate detailed financial reports for specific ministries
Best Practices for Church Financial Management
1. Focus on Accessibility
“In the church and nonprofit world, we’re appealing a lot of times to financial statement readers who are not accountants or not necessarily coming from a financial background,” our experts emphasize. This means reports need to serve both technical and practical purposes.
2. Invest in Setup
We strongly encourage organizations to invest time upfront determining what they want to see in their reports. This initial investment ensures your accounting system is set up to produce the exact information your leadership needs.
3. Streamline Payment Processes
Our team has extensive experience helping clients manage their payables processes, particularly with credit and debit card spending. We understand that volunteers or non-financial staff may handle these transactions, so we focus on establishing clear, workable parameters.
Unique Tools for Better Financial Management
One of our most valuable offerings is our cash requirements and true balance report. This unique tool:
- Shows current cash resources alongside accounts payable obligations
- Helps leaders make informed payment decisions
- Provides reconciled bank account balances
- Includes short-term projections for upcoming expenses like mortgages
Technology Solutions That Work
We’ve carefully selected our software platforms to meet varying church needs:
For Standard Accounting:
“For our clients who don’t need fund accounting, we use QuickBooks – either Enterprise or Online. We lean towards QuickBooks Enterprise if our team is going to be handling the lion’s share of everything, while Online is preferred when the client is very interested in integrations with third-party software.”
For Fund Accounting:
We utilize Aplos, a specialized church accounting and management solution that provides comprehensive fund accounting capabilities.
Our Church Accounting Services
With 20 years of specialized experience serving churches and religious organizations, our team brings unique value to every client relationship:
- Deep understanding of church-specific accounting guidelines and practices
- Experience working with organizations of every size and type
- Expertise in both technical reporting and ministry-focused communication
- Proven track record of improving financial processes and reporting
“Churches have to produce financial statements for auditors or for outside readers such as banks,” our experts note, “but internally your readers are different – they’re oftentimes people who are from a creative background or a ministry background without a financial statement understanding.”
This dual purpose requires specialized expertise – balancing technical accuracy with practical accessibility. Our exclusive focus on churches and religious nonprofits means we understand these unique challenges and how to address them effectively.
Looking to Outsource Your Church Accounting?
Our church accounting professionals look forward to helping you strengthen your financial management while allowing you to focus more time on ministry. Contact us today to get started!
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