Some thoughts when it comes to closing off your church accounting or reporting period

When it comes time to process or close off an accounting period (whether monthly or annually) in your church accounts, what are some of the main things that will be helpful to consider? In this article we explore briefly: your church bank reconciliation; tracking reserves for your church; and some additional checks and balances to think about.

Bank Reconciliations

As you draw each financial period to a close (whether monthly, quarterly or annually) there are some key areas that you’ll be wanting give attention. The first of these is you bank reconciliations.

Your bank reconciliations record all movement of money into and out of your church’s bank and credit card accounts. The process of reconciliation ensures that what is occurring in your bank is correctly and helpfully being captured and recorded in your accounting software. In this way, your bank reconciliation acts like a kind of “gatekeeper” controlling the information coming into your accounting system.

While your software makes this process quicker, your reconciliation needs to be checked and errors corrected so you don’t end up with growing inaccuracies in your figures that could come back to bite you. (Sometime automation can simply automate mistakes!).

Perhaps when you review past reconciliations, you may find that money has been allocated to the wrong place in the accounting software, or even entered multiple times. If your accounts are incorrectly reconciled, it can lead you to unhelpful reporting, or worse – you or your team could be making decisions that you regret based on wrong information.

Knowing where to look to spot these errors (and knowing how to fix them), can make the difference between you having accurate or inaccurate accounting. So, during the reconciliation review process, it’s helpful to check the reconciliation reports and follow up discrepancies that you find. Resolving these will help you experience increased reliability and usefulness in your church reporting.

Tracking Reserves

Like most churches, you will often be collecting funds for a variety of reasons. Some of your funds need to be set aside for specific purposes (for example new church facilities such as a sound system or air conditioning) or as part of your fundraising efforts for other missions, or even as an obligatory ledger for an external property trust or the like.

Without good accounting of these fund transactions, it can become quite complicated for your teams and volunteers to accurately track the movements and balances of the funds and remain compliant with the reporting requirements of your denomination.

Also, it is particularly important that specified funds do not become confused with your general operational funds (which can lead you to misread how much money you have available).

So, as part of your bookkeeping process, you’ll want to be:

  • keeping track of your funds that you have set aside for special purposes or ministries
  • implementing effective and compliant bookkeeping procedures to account for these funds
  • processing the monthly, quarterly or annual general ledger journals required to maintain good records of these funds
  • getting helpful information and reporting on movements in your fund transactions and balances
  • ensuring that you are correctly treating the different types of funds you have

Part of this may also involve ensuring your chart of accounts is aligned with this clear accounting process, further assisting your church to see how you are achieving your savings and mission goals.

Checks and Balances

You may be surprised how easily and quickly your church’s accounting system can get out of whack (you may have experienced this firsthand!).

Some of the reasons this can happen to you may be:

  • you have multiple users of the system and your information is being duplicated
  • your new users may be uncertain of how to process your transactions correctly
  • your experienced users may not have the knowledge or time to check the integrity of the system data as they are entering this into your system

So that you are not caught out by unwanted errors like these, why not put in place some additional period-end review that includes:

  • check for extraneous transactions in your system (where things have been entered, but are not showing up in your bank account)
  • checking and reconciling your Wages Payable (ensuring that your employees have received payments in line with your payroll system)
  • checking and reconciling your PAYG (checking that amounts you’ve remitted to the ATO for PAYG match your system)
  • checking and reconciling your Superannuation Payable (checking that what you owe for superannuation has been correctly sent)
  • checking and reconciling your ATO Client Account (checking that your system is accurately aligned with your ATO client account in areas of GST, PAYG, interest and penalties, and that any balances you owe the ATO, or that the ATO owes you, are correct)

Major unplanned adjustments in key areas like these can directly affect your bank account and available funds. And so regular checks of these key places in your system helps keep things in order and alert you to where issues may be occurring before they get bigger.

In addition to these regular checks and balances, you may also benefit from considering some of the more irregular (but important) items that may come up, sometimes only annually. Things like:

  • Depreciation – tracking the diminishing value of an asset over time through a regular depreciation journal in your accounting system
  • Levies – accounting for denominational levies or charges that may apply to your church
  • Revaluations – in particular of your church land or properties

Keeping track of these items on a regular basis can not only make your accounts more accurate, but also help speed up the process when audit time comes around.

Would you like to explore further topics related to church bookkeeping, church payroll and church financial management? eBook available now:

Your Handy Overview of Church Financial Management

(including your 80+ point Church Financial Management Overview Checklist)

This guide aims to provide a useful and helpful big-picture view – to assist you in further developing the financial function of your church in your context. Designed for church pastors, church ministry leaders, church officeholders, church admin teams, church treasurers and church members.

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