The Ultimate Guide to Church Accounting Software

What is church accounting software?

Fiscal responsibility, especially for churches, is essential, and having accounting software that can handle the complex finances of churches and non-profits is necessary to maximize ministry opportunities and remain compliant when tax season rolls around. Church accounting software is specifically designed for the unique intricacies of ministry finances.

It is similar to traditional accounting software, but it's built to handle everything related to church finances. It includes features like tracking tithes and offerings, balancing the books, creating reports, organizing funds, and paying vendors and staff.

Because many churches don't even have an experienced accountant on staff, good church accounting software should also be easy enough for anyone to use. With it, church staff should be able to track and manage everything related to the financial aspect of a religious organization.

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Differences between church accounting and accounting for businesses.

Businesses have very different goals in comparison to churches, particularly when it comes to finances. For a business, their bottom line is profitability. For religious organizations and non-profits, their goal is to achieve their organization's mission. Of course, both need revenue to reach their goals, but faith-based entities use it to serve the people around them.

To understand the importance of church-based accounting software, we need to understand the contrast between for-profit businesses and not-for-profit institutions.

For-profit vs. not-for-profit

As you would expect, a for-profit business is "established, maintained, or conducted for the purpose of making a profit." Business stakeholders are most concerned with the bottom line. At the same time, founders and board members of non-profits and churches are focused on tracking contributions and allocating funds and resources based on the mission. They don't exist to make a profit, thus the title: non-profit. Churches and religious organizations fall under this category.

Key differences

Ownership

One distinction between traditional companies and churches is the fact that various individuals and entities can be owners or shareholders of a for-profit business. These owners benefit from their company's earnings because they receive a portion of the revenue or value increases.

Churches are not owned. No individual possesses a percentage of the organization. Under the Financial Accounting Standards Board (FASB), specific accounting principles are in place for non-profits. And each church is under the financial laws of the state in which it resides - being run by pastors, its board, and staff. Because there are no owners, the church's accounting system doesn't include owner's equity or retained earnings accounts.

Fund Accounting

Another significant difference is the idea of fund accounting. Businesses have one general ledger, while non-profits have an accounting method that manages various types of funds. For churches, this is the emphasis on accountability of where money is going versus profitability. According to purpose, it groups assets and liabilities, which makes donations, or revenue, restricted in their use and can only be distributed for their specific purpose. For example, if a church is hosting a giving campaign to raise funds for a new building project, any of the money received specifically for this project can only be used for this purpose. The church cannot use that money to pay for the electric bill or host a youth camp without getting prior permission.

Revenue Received

Both businesses and churches alike can earn revenue by selling goods or providing services. Still, the main difference is that the majority of what churches receive comes from contributions, like tithes and monetary donations. Because of this, they have to keep track of what money is received and which fund it is being used for. They also have to be able to provide statements to their contributors along with other tax-related regulations.

Accounting Terminology

Some other differences include terminology. For example, instead of retained earnings, non-profits categorize them as net assets. Net income is the excess of revenues over expenditures. These uses of varying terms can make it difficult for churches to adopt a secular bookkeeping service to their specific needs. Though it isn't impossible to do, having accounting software designed for churches will help organize everything finance-related.

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Why you should use accounting software designed for churches:

It is created for churches.

As mentioned previously, churches have incredibly unique needs regarding how they handle their fund management, receivables, payables, and ledgers. Having software designed with the church in mind can be extremely helpful. However, because of the financial particulars and tax considerations that churches face, a popular program like QuickBooks can quickly become overly complicated because they do not specialize in non-profits like religious organizations.

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It saves time and money.

With a program created for ministry, you can streamline your church's financial processes and actions, which will help reduce administrative work and improve efficiency. In addition, church accounting software will save time because you won't have to convert processes from a traditional business standpoint to fit within FASB principles. Your ministry can also save money and headache by ensuring funds are adequately placed and used for the specified purpose.

Money can be managed from anywhere.

With a cloud-based accounting program, you can gain secure access to your church finances at any time, from anywhere—view data and reports in real-time. And with automatic data backups, you'll have peace of mind. If someone on your team isn't in the office but needs to balance the books or check the budget, they can do so from any device.

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Import data from existing systems.

With the best church accounting software, our conversion team can easily import Names, Vendor lists, and associated addresses, telephone numbers, and email addresses from any existing system by providing us a flat-file CSV or excel spreadsheet. One of the main reasons churches stick with an outdated, traditional system is because it seems too difficult to switch over current donors and their information. But with the right church financial software, importing data can be done with ease.

Features of modern church financial software:

Ledger

All companies need some form of tracking financial data. A general ledger is a record-keeping system that monitors debit and credit transactions. These transactions are segregated by type. For churches and non-profits, they are generally broken down into even smaller subgroups to keep accurate records.

With church accounting software, the general ledger should be able to operate true fund accounting that meets the specific needs of that church. The ledger will simplify the budgeting process because departments and staff can view reports and track how finances are compared. The general ledger in an accounting system designed for churches will meet the financial accounting standard requirements (FASB117), too.

Benefits of FellowshipOne with Shelby Financials Ledger:

• Provides flexible account structure for customized chart of accounts and reports
• Department worksheets and Excel® import/export
• Automatic deposits from member contributions and pledge postings
• Delivers non-profit reporting that reflects church ministry

Payroll

Just because churches are non-profits doesn't mean there aren't people on staff. It takes a lot of hard work to run a church and make a difference in the community. With a payroll system designed for the church, managing payroll, deductions, benefits, special clergy allowances, and personal time is easier because it is made with ministries in mind.

Your payroll system should automatically be tracked in your general ledger, so you don't have to duplicate data entry or do special imports. It is also beneficial to have payroll automatically allocated to funds and departments.

Benefits of FellowshipOne with Shelby Financials Payroll:

• Guides the user step-by step through the payroll process
• Handles special clergy allocations and benefits
• Saves costly checks by printing direct deposit receipts on standard copy paper
• Satisfies all your data needs with its versatile reporting system

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Receivables

Accounts receivable represent any money that is owed for goods or services that have already been purchased. This money is usually collected at a later time.

Church accounts receivable help to track invoices, due dates, payments, "customers," deposits, and more. You can get an accurate picture of your true financial position if receivables are connected to your chart of accounts.

Benefits of FellowshipOne with Shelby Financials Accounts Receivable:

• Boosts productivity
• Streamlines management
• Uses your central chart of accounts

Payables

On the other end, accounts payable is any money owed by a company (or in this case, a church) to its creditors. Whether a business, church, or non-profit, it is the obligation to pay off short-term debt to vendors or suppliers.

Using a true fund accounting system will help your church gain instant access to the financial information you need. First, track how much and where your money needs to go. Then, sync it to the general ledger to have a solid understanding of the financial status of your church.

Benefits of FellowshipOne with Shelby Financials Accounts Payable:

• Secure access anytime, anywhere via the web
• User permissions by function (and fund)
• Automated data backups and software and tax table updates

Reporting

Having access to financial reports is extremely important for businesses and churches, too, mainly because churches have a wide range of donors, pastors, and financial councils that need to view such reports.

Connecting church staff to their accounting records is crucial to maintaining accountability and up-to-date financial status.

Benefits of FellowshipOne with Shelby Financials Reporting:

• Take the stress out of providing financial statements to those who need them
• Get instant access to your church financial reports securely on the web
• Satisfy all your data needs with a versatile reporting system

Integrations

Having a church accounting system that is integrated with your church management software (ChMS) and your online giving is critical. It will help streamline all of the complicated processes and save valuable time. Be an excellent steward of your two most valuable resources: people and finances.

Reduce the amount and degree of errors caused by manual data input. Reconcile contributions and receipts with online giving and accounting. Track your members and donations all in one easy-to-use system.

Benefits of the integration of FellowshipOne with Shelby Financials:

• Built to provide transparent financial visibility
• Streamline your existing accounting processes
• Have one system in place for multiple functions