Approvals and Workflows
When it comes to making payments, in our experience churches generally have a higher level of governance than do businesses of the same size.
The main reason for this could be that often in a business setting (particularly smaller businesses) there is an owner or delegate who is authorised to make purchasing decisions and payments with little or no reference to other stakeholders.
Churches, on the other hand, will generally have a layered approach to authorisation, with a number of checkpoints, controls and limits built in.
You may find that in your church you have a typical layered approach along the lines of:
- Budget approval – this is a high-level of approval usually reviewed at least annually, where broad areas of expense are allocated an anticipated amount
- Officeholder approval – this is generally at the time of the expense where an invoice is received. This level of approval could be structured as:
- Pre-approval – where officeholders must approve invoices at the start of the process
- Post- approval – where payments are reviewed by officeholder retrospectively
- Delegated combination – where other a delegated to parts of the approval process within certain limits and criteria
- Banking approval – this can overlap with the office-holder approval or could be a separate process. More often than not there is a dual authorisation requirement set up for the church’s bank account, which is the final step prior to funds being released.
Given the potential steps here, it can be helpful for the whole team to have a well-documented and understood workflow, specifying who is responsible for each stage, and some agreed timeframes and confirmations. This will assist the process to run smoothly and get through to completion with reduced delay.
Suppliers and Coding
As with the data entry of income items into your accounting system, the coding of expense items is important for having good management and compliance information later on.
Some of the key information that will benefit from attention in the coding process includes:
- Supplier information – setting up good supplier records (and avoiding duplicate records) helps to collate supplier information in one place, and also helps with the consistency of information. Also establishing the payment method and details for each supplier can save time when preparing payments down the track.
- Expense allocation – each supplier payment will be coded to one or more accounts in your general ledger. Taking care to code it where you want it at the start means that this allocation will flow through correctly to your reports with the item sitting in the correct expense category
- GST – it’s also important to account correctly for GST at the point of data entry. Ascertaining the correct GST status of each supplier and each bill will increase the accuracy of your system and help avoid the need for adjustments and corrections. Note that some payments may have a combination of GST and Non-GST items, so take care to catch these as well.
Where you have regular suppliers with multiple transactions each month, it may also be a helpful process to request a statement from these suppliers on a regular basis. Then you can compare the history of transaction in your accounting system against the supplier records. This can be useful in picking up anomalies or errors before they escalate further.
Management and Technology
One of the tricky areas that you may have come across in your church finances is how to manage many incidental and ad-hoc expenses that are incurred.
These types of expenses could involve a wide variety of people including staff, admin teams and ministry teams. Further, the expenses could relate to a wide variety of purposes including ministry, office, and pastor’s expenses.
Managing all this can be daunting, especially when there are lots of people and lots of transactions involved.
There are a bunch of ways this type of situation can be handled, and it will be a case of working out what is effective and smooth for your church team – there is not necessarily a “one-size-fits-all” solution. But when thinking through this, some of the things to consider may be:
- What will be the guidelines for individuals wishing to incur an expense on behalf of the church – who do they contact, how do they know if it’s okay or not, and how will they be informed of the process they should follow
- What options will you make available as payment or reimbursement methods, for example:
- Ad-hoc expenses be paid by reimbursement only; or
- Floats in certain situations; or (and how will you track and account for these)
- Some individuals having access to a church credit card; or
- Some other configuration
- What will be the actual reimbursement process and timeframes when individuals are out of pocket
There are also a number of ways to use technology options to help streamline this process. So, it may also be worth exploring available products that can:
- Provide virtual credit cards
- Allow categorisation and budget control
- Assist with receipt and data capture
- Integrate with your accounting system
Would you like to explore further topics related to church bookkeeping, church payroll and church financial management? eBook available now:
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