Churches across the world trust church accounting software like ours to track expenses, manage funds, create budgets, and more. Unfortunately, churches think that adopting a church accounting tool will cause all their accounting problems to magically disappear.
This leads ministry leaders to going over budget, spending countless hours doing things the hard way, or completely having to redo the books and start over fresh!
Let’s say you have a house that has developed a huge crack in the foundation...
Would you say “I know how to fix this! We’ll repaint the outside, update the kitchen, and get a new couch.”
Of course you wouldn’t!
But this is what we see many churches do every other year with their accounting. Instead of addressing the “culprits of complexity” to fix their finances, they just switch to another accounting platform. A year later, their budget is still a mess and they’re taking money from one fund to pay for another.
The cycle stops now.
The bandaid, consider it ripped.
From working with thousands of churches over almost 2 decades, we’ve identified the "culprits of complexity" when it comes to church accounting. Once churches identify these culprits (and fix them), they are able to drastically simplify their accounting structures and actually use their church accounting software the way it’s intended.
Before we talk about the culprits, we need to answer the question of why we need to simplify our church accounting. It comes down to two groups of people: Donors and Leaders.
Churches rely on donations to do ministry. These donations come in the form of tithes and offerings from generous donors that believe in the vision (and mission) of our church. Of the donors that give, many will want to see a budget or some sort of category fund statement. These reports give transparency as well as accountability.
The last thing we want to do is hand out a convoluted report to our people. It has to be understandable and give clarity so that every donor can know where the funds are going. This is especially important for congregations that vote on an annual budget.
For those who run the church and make financial decisions, they need to be able to make those decisions easily (and sometimes quickly). Leaders can’t get bogged down by sifting through a dozen funds to “find money” for a ministry or accidentally spend over budget without knowing.
Complicated church finances make churches slow, ineffective, and worst of all... Wasteful!
Let’s find the culprits that are complicating your church finances, and eliminate them for good!
Last year I was working with the treasurer of a rural church in south Texas who was wanting to switch to our accounting system. She said that our software seemed just as complex as their last one. That was until I logged into her account and saw something that literally made my jaw drop...
Their church had 15 different funds.😲
Sure, they had the standard funds we’ve seen before. Things like a General Fund, Missions Fund, and a Youth Fund.
But then they added almost a dozen other funds on top of that! Funds like a flower fund for the cemetery, a VBS fund, a coffee fund, an elevator fund, and many more.
How to simplify your funds: Consolidate your funds that are alike and create categories for the things you need to earmark and specifically track. For example, you don’t need multiple mission funds or multiple building funds to specify where you want money to go. That’s what you can use categories for.
Check out this convenient AccountingChart to see how funds, categories, and accounts are linked to each other in a fund accounting structure.
Do you have a personal budget category for dishwashing soap?
What about a budget for ramen noodles or toothpicks?
Of course you don’t!
You lump these items together and make them all part of one category for something like “groceries”. Unless you go through an excessive amount of ramen (like I did with ramen in college), it would just be laughable to make a separate category for each item. Besides, ramen is too cheap to itemize on its own anyways.😂
Though a toothpick budget sounds outrageous, we see churches take this approach when they create their income and expense categories. If it takes you more than 5 seconds to scroll through your categories... you have too many categories.
How to simplify your categories: Just like we said with funds, you need to consolidate. For example, you don’t need a separate category for pens, paper, toner, paper clips, and post its. Just call it “office supplies”.
One tactic we’ve seen churches use is to set a dollar amount threshold for when an item needs to have its own category. Depending on the size of your ministry, this threshold could be as little as $100 or as much as $1,000.
A few months ago, I was onboarding a mid-sized church that was celebrating their 120th year anniversary. That’s a big deal!
As we got to talking, the finance director told me that she was struggling with adding in all her accounts to the software. I took a look...and behold...there were 10 different accounts!
Come to find out, the only reason they had so many accounts is because “that’s the way it’s always been”.
How to simplify your accounts: You don’t need different bank accounts to keep all your funds separated. That’s the job of your church fund accounting software. When it comes to credit cards, consolidate to one credit card account and have multiple cardholders if needed.
On average, churches using ChurchTrac have 3 to 4 accounts.
Churches very rarely miss depositing checks or cash into their bank account. However, we’ve seen many churches forget to make deposits into their accounting software.
Forgetting to make deposits will quickly cause your finance team to #FreakOut as they keep seeing the church bank account become drained into the negative.
How to simplify your deposits: Have a regular set time or day that you comb through all your giving and create a deposit for your donations. Make this a regular occurrence that eventually because automatic for you. This ensures that your accounts match up with your actual bank balance.
To create a deposit in ChurchTrac, navigate to your Giving Screen and select the giving date you wish to create a deposit for. Click the “Create Deposit” button to generate a deposit.
The system will then prompt you to select which account you wish to create a deposit. You can proceed in selecting which account you would like the deposit to be made to.
Quick note: If you’re using ChurchTrac Online Giving, you do not need to manually make deposits for your online donations. Take advantage of the Automatic Online Giving Deposits feature, and ChurchTrac will automatically deposit your online donations.
Learn more about Automatic Giving Deposits
Reconciliation is just another word for “double-checking”.
When you reconcile bank accounts, you’re comparing two sets of records to check that figures are correct and in agreement. Account reconciliation also confirms that accounts in the general ledger are consistent, accurate, and complete.
Typically, churches fail to reconcile their accounts for one of 3 reasons:
How to simplify your reconciliations: Reconcile your accounts as often as possible. If you make this a regular habit, your reconciliation process will only take a few minutes. Reconciling frequently also helps you catch errors earlier.
Made a mistake and need un un-reconcile? Learn How.
One of the biggest challenges for churches trying to adopt a church accounting program is not having an existing church budget to go off of. Here are some of the excuses we get...
“We’re a church plant and we don’t have giving history to create a budget from.”
“Our church is small, and we just pay for the things we need with each week's offering.”
“Every time we create a budget our numbers are way off. So we just stopped trying.”
Creating a church budget is not as hard as you think. However, it’s something you have to be intentional about. Get your team together and talk through how much giving the church received last year and then categorize your expenses and incomes.
If you’re a church plant with no giving history, you can still create a budget. What you’ll want to do is create a pledge campaign of your current donors for the next year and use that annual pledge total as your baseline.
How to simplify your budget: One of our favorite accounting features in ChurchTrac is the “clone” button in the Budgets tab. Once you set up a budget within ChurchTrac the first time, you can simply clone last year's budget and then adjust the category totals as needed. Once you do the initial legwork to make your budgets within ChurchTrac Accounting, each year after will be simple as pie. 🥧
“De-complexifying” your church accounting is NOT a one and done thing. It requires discipline, like a runner training for a marathon. But here are a couple ways you can keep from slipping back:
Fund accounting is an accounting system for recording resources whose use has been limited by the donor, grant authority, governing agency, or other individuals or organizations or by law. When it comes to tracking and managing funds, you need accounting software that is specifically designed for it. Most church accounting systems are funds based.
You can. But spreadsheets can be rather limiting when it comes to tracking and reporting church finances. Unless you’re an excel guru with plenty of time on your hands, it’s best to use purchase a church accounting tool as it will simplify your workflow and save you hours of time.
Quickbooks and Quicken are NOT true fund accounting programs, plus they're crazy expensive. Though you can adapt the software with a few workarounds, it is far more complex than using a tool made specifically for church accounting.
The best accounting software for small and mid-sized churches is one that is simple to use and affordable. There are many church accounting platforms to pick from, but they’re either extremely complex or completely unaffordable. That’s why we decided to be different...
ChurchTrac is the best accounting software for small and mid-sized churches. On top of being ranked the #1 most affordable church accounting software, we’ve also been ranked in the top most user-friendly. But it gets better...
Not only does ChurchTrac do church accounting, but it’s a complete ChMS with Worship Planning, Online Giving, Child Check-In Kiosk, and more! Start your 30-day free trial of ChurchTrac today and see what you’ve been missing out on.