Solid financial practices pay dividends for churches

church accounting

By Jason Terrell

In today’s world of rapidly changing expectations, all areas of ministry come under scrutiny — and none more so than the church’s finances. 

So, how can a ministry do what it takes to keep itself financially sound?

 

To start, make sure your church management software integrates with a strong financial software designed specifically for churches. This is why FellowshipOne, a leading provider of church management software, integrates with ShelbyFinancials, a solution trusted by ministries across the country for 40 years.

Benefits of integrating financials and church management solutions include:

  • Reducing the chance of data transcription errors that come from moving data manually from your financial software to your church management software;
  • Easily accessible records on people and money; and
  • The ability to produce combined reports on membership and finances.

Next, take a careful look at how your ministry’s handles its finances, and make sure you have some best practices in place. Alfred Johnson, a former pastor of 30 years and an expert in financial and church management software, has consulted with hundreds of churches in his career. He is also the product owner of ShelbyFinancials.

In his role as a consultant, Johnson has helped many churches get the most out of their software by establishing best practices when it comes to accounting. He emphasizes that it is essential that pastors have a clear picture of the church’s financial standing.

Alfred Johnson

“Many pastors don’t have a bookkeeping background, much less an accounting background. That means that for pastors, sometimes just understanding a basic statement of financial position might be confusing,” he says. “Therefore, it’s important for the church accounting office to produce specifically designed reports that can provide the pastor with a clear and concise financial status of the church.”

Building the kind of detailed, accurate financial overview that the pastor and church financial leadership needs starts with finding the right software, Johnson says. “Churches should be using accounting tools that are designed for nonprofit accounting — better still, programs designed for churches.”

Look for in a financial solution is the ability to leave a transparent and secure audit trail. “It’s important that the software you choose keeps detailed records of all changes made throughout the process to assure that nothing has been altered against church policy,” Johnson says.

While many do not like to think about it, churches are not immune to things like embezzlement. In fact, a 2017 study by Lifeway Research reveals embezzlement of funds has occurred in one in 10 Protestant churches. “Churches run on trust — but they also know people are imperfect and can be tempted,” writes Lifeway Research Executive Director Scott McConnell. “That’s why safeguarding a church’s finances is an important part of ministry.”

“Ideally, you want to avoid software that allows users to change the General Ledger record,” Johnson points out. “If you have to use software that has that kind of access, then you should have a very strict separation of duties policy in place, along with weekly reviews. And that all takes time and exposes the church to risk.

“Instead, best practices dictate a church should never create a structure or situation where staff have the power to manipulate the records,” he advises. “Also, to assure further security and transparency in their ministry’s bookkeeping, pastors should set up an in-house audit for each year that they do not have a full formal audit by an outside firm who specialties in non-profit accounting.”

Define clear roles in the accounting department. Keeping clearly defined roles in the accounting department can help keep the church’s books clean, Johnson says. “For example, having one person count the weekly offering and depositing the funds can be a risky practice,” he explains. “Also, the person entering accounts payable invoices should not be the same person that is approving and printing the checks.”

Choose a financial solution that will work well with your church management software. As Johnson points out, this builds even more efficiency into the process. It also ensures that things like Contributions can flow smoothly across both solutions.

“Auditors like to make sure that reports generated in each sub ledger match what is reflected in the General Ledger,” Johnson says. “Without a connection with the General Ledger — say, from Contributions — that task can be difficult and might create a condition where an auditor cannot complete the audit.”

“[F]or pastors, sometimes just understanding a basic statement of financial position might be confusing. Therefore, it’s important for the church accounting office to produce specifically designed reports that can provide the pastor with a clear and concise financial status of the church.”

Pick a program that can grow with you, and buy from a company that can help you use the software more efficiently. As Johnson points out, ShelbyFinancials has a number of features that strongly support the most demanding separation of duties.

“In fact, if the church has the staff, it can have one or more people entering invoices, creating billing, counting money, making deposits, printing checks, sending out Accounts Receivable statements, entering hours worked into Payroll, printing checks or creating ACH deposits, as well as an accounting manager who reviews and posts all journal entries produced by sub-ledger activity.

“Use one of our consultants to help create, or revise the churches chart of accounts,” he recommends. “Not having a properly constructed chart of accounts can lead to extra work in creating reports. It can also lead to producing reports that are hard to understand.”

 

Jason Terrell is the Marketing Strategist for FellowshipOne church management software.

 

 

 

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