Do you know that church bookkeeping is not as complicated as you think?
At least, compared to bookkeeping for regular business, church bookkeeping is a lot easier. Regular businesses have to create balance sheets as well as profit and loss statements.
It is far different for a church. The simple single-entry method works perfectly for churches since they don’t have to record profit and loss. In fact, with church management software like ChurchPad, you can handle church bookkeeping easily.
Have you been finding bookkeeping difficult at your church? We will provide you with some helpful tips in this post. Check them out below.
Basic Bookkeeping Tips for Churches
This section will discuss a few bookkeeping tips that will help you get better at church bookkeeping. They are pretty simple, and you can implement them straight away.
Classify every transaction properly
Many churches make the mistake of not classifying deposits and expenses correctly. You should always classify every transaction with the proper labels. It is pretty easy since the classifications aren’t so diverse.
For example, when someone pays a tithe, you should record it as a tithe, not an offering. Also, if someone sends in seed for a certain project, it should be recorded accordingly. Don’t make the mistake of putting the wrong labels on transactions. Doing this could affect your records which could result in misappropriation of funds.
Maintain proper financial statements
This is just a continuation of the point above. Churches must maintain accurate financial statements. These statements come in handy when the auditors arrive, or you require external funding.
This is why we suggest that churches encourage digital donation. When you do this, it is easier to come up with financial and donor reports. Let’s say you need to raise funds for a project from an external source like a bank. You will be required to provide financial statements for about three years. If you don’t have detailed reports, it means that you may not get such funding.
Financial statements also help you to see your church’s financial position. This will make it easier for you to make financial decisions at your church. As such, you can measure whether your income is improving or not. You can also decide how much you should have as restricted funds and the percentage you can spend.
Financial statements shouldn’t just focus on revenue and expenditure. They should also include assets and liabilities. An app like ChurchPad can help you do this easily.
Reconcile your books frequently
Even if you are using an app to handle your bookkeeping, you still have to reconcile your books. When you reconcile your books frequently, you can reduce errors to the barest minimum. Reconciling your books and accounts helps you to observe several issues. Examples include missing transactions, amount discrepancies, duplicates, and bank errors.
Several accounting software helps you to make the reconciliation process far more manageable. Here’s one of the best practices of reconciling books. The individual doing the reconciliation should be different from the one entering the records. This makes it easier to notice errors, thus improving your overall accounting process.
You can improve your reconciliation process by integrating your bank account into the app you use. This way, the app can record every transaction, incoming or outgoing. It also pulls records from bank cards as well. As such, you aren’t just relying on data from your bank; you have a copy for yourself.
Classify your church workers properly
This is one of the most significant bookkeeping errors that churches make. There is a clear difference between a volunteer and a church worker. The latter are paid salaries while the former do not receive salaries.
If you are paying anyone’s salaries, you should classify them accordingly and record such transactions appropriately. The tax authorities view church workers as regular workers in any business organization. This means that church workers should pay taxes on the salaries they receive from the church.
Ensure that you avoid this mistake as much as possible. Not classifying your workers correctly could lead to severe penalties from the tax authorities. Ensure that you check the tax guidelines for your State and Country. This will help you know what levies your church staff is expected to pay. If you are still having issues with this, you should speak to a professional.
Don’t do your bookkeeping by yourself
This is where many small churches have a problem. Because you are on a strict budget, you want to use a volunteer with little knowledge of accounting. You shouldn’t do this as it can affect your bookkeeping processes adversely.
When the pastor or some inexperienced volunteer handles the books, there will be lots of errors. They don’t have the slightest idea of creating an efficient accounting system, let alone maintain one. What happens is that the church ends up with a terrible bookkeeping system. Interestingly, they may not know what is wrong until they have to handle more severe accounting issues.
At this point, they realize that they are in a whole of trouble and have to pay a considerable sum to salvage the situation. Why not do the right thing initially and save yourself all the stress?
ChurchPad is a lot more than church management software. One of the best features of this app is that it helps you handle your church accounting efficiently. This is asides from the fact that it enables you to develop an automatic giving system. It also helps to monitor text giving and digital donation.
As such, you can easily access financial and donor reports. It also makes it easy to track bank transactions since it integrates with your bank account seamlessly. There are several other benefits that you can enjoy from using ChurchPad at your church. Have any questions? Drop them in the comments section.