These tips are all about making church finances less daunting and more manageable no matter the size of your church.

By keeping good records, working together, and planning ahead, you can keep your church's finances healthy and focused on supporting your mission.

Here are the 5 most common church bookkeeping mistakes, but most importantly how to avoid them!

1. Not tracking all money going in and out

This first one may seem like a no-brainer regarding church finances; keeping track of all the money coming in and going out. But is this easier said than done?

Common Slip-Up: Sometimes, churches don't keep close enough tabs on receipts and donation records. This can make it hard to know exactly how much money the church has and could be problematic when it's time to review the books or handle taxes.

Through the busyness of day-to-day administrative tasks, sometimes we may not be as detailed as we'd like to be. Especially when one person is trying to keep a handle on all of the bookkeeping AND accounting duties. This can be a lot to juggle! How can we avoid this mistake?

How to Avoid It: Make sure you record every single penny that comes in or goes out of the church's accounts! Use software designed for churches and non-profits to help keep everything organized. For donations, always give a receipt to the donor and keep a copy for your records.

2. One person doing all the church bookkeeping

Have you ever heard the old saying, "Two heads are better than one!"? In the context of overseeing church finances, this saying emphasizes the importance of having multiple individuals involved in financial management to enhance accountability, transparency, and decision-making.

Common Slip-Up: If only one person is in charge of the money, mistakes (or worse, misuse of funds) can easily happen without anyone else noticing. How can we avoid this mistake?

How to Avoid It: Create a small group of trusted individuals, like a finance committee, to watch over the church's finances together. Put in place simple checks, such as requiring two signatures for larger expenses, and regularly review financial reports as a team.

Teamwork and collaboration are the keys to financial success!

3. Mixing church funds with personal funds

Though there are many benefits to keeping your church and personal finances separate, the two main reasons you should draw a line in the sands of finance are tax laws and personal protection reasons.

Common Slip-Up: Mixing up personal and church finances can lead to a lot of confusion and potential legal issues.

Maintaining separate accounts reinforces the financial integrity of both the church and the individuals involved in its management. It prevents conflicts of interest and unethical behavior from arising when the two are blended. How can we avoid this mistake?

How to Avoid It: Always use separate bank accounts and credit cards for church activities. This way, church money and personal money don't get mixed up, making everything clearer and simpler to manage.

Ultimately proper management of church funds demonstrates respect for the generosity of donors and ensures their contributions are used responsibly.

4. Not understanding tax rules for churches

Understanding tax laws is particularly important for churches due to their unique status as tax-exempt organizations.

Churches enjoy tax-exempt status under specific provisions of tax codes and regulations. Understanding the requirements and limitations of this status is essential to ensure that the church remains compliant with IRS regulations and retains its tax-exempt designation.

Common Slip-Up: Churches have special rules about taxes that can be quite confusing. Ignoring these rules can lead to penalties or owing back taxes. How can we avoid this mistake?

How to Avoid It: Take a little time to learn about the tax rules that apply to churches in your area. You should also talk to a tax expert or accountant to make sure you're on the right track with the correct tax forms and documents needed. They can help you understand what you need to do to follow the laws accordingly.

Getting insight from a bookkeeping service or a CPA who knows bookkeeping for churches can also help you save you money. Often times they can help churches identify ways to cut costs or take advantage of programs unique to nonprofits.

5. Not saving any finances of the church

Spending money is easy, but spending it wisely requires discernment, foresight, and discipline. Church leaders and bookkeepers are accountable to the congregation, donors, and regulatory authorities for managing and allocating church funds.

Common Slip-Up: Sometimes churches spend without considering future expenses, which can lead to running out of money when it's needed most. How can we avoid this mistake?

How to Avoid It: Create an annual budget and monitor it at least monthly. Keep an eye on your bank balance and think about what expenses are coming up. Planning ahead can help you make informed decisions about when to spend and when to save. Regularly checking your financial situation can help avoid any surprises.

Pro Tip: Keeping accurate financial records or financial statements also aids in tracking expenses and maintaining financial stability. Staying on top of necessary financial duties, including maintaining your reports will help tremendously in the long run!

Church Bookkeeping: The Tools You Need

• Church Accounting Software: Invest in church-specific accounting software that caters to the unique needs of churches and nonprofits. Look for features such as fund accounting, contribution tracking, budgeting, and reporting capabilities
• Church Management Software: Consider using ChMS software, which often includes built-in accounting modules along with features for member management, event planning, and communication. Look for solutions that offer seamless integration between financial and administrative functions 
• Training and Support: Invest in training and support resources to ensure that staff or volunteers responsible for bookkeeping have the necessary skills and knowledge. Consider enrolling in training courses specific to church accounting, attending webinars, or accessing online tutorials and resources provided by accounting or church management software vendors

The best approach? Choose a church management software that does it all!

Balancing the Books and Blessings

Effective church bookkeeping is not merely about numbers; it's about stewardship, trust, and financial responsibility. By recording transactions, using helpful accounting tools, and prioritizing financial integrity, church bookkeepers play a vital role in supporting the mission and vision of the church.

With careful attention to detail, they ensure that every dollar entrusted to the church is used wisely and purposefully toward the kingdom of God.

Let's keep those ledgers balanced, and those receipts in order, and stop wasting valuable time by implementing more efficient bookkeeping practices, allowing more focus on spreading the light of the Gospel of Christ!

Matt Church Engagement