What are Church Accounting Services?
The documentation of transactions and the planning for future transactions make up the church accounting process. Recording ordinary and extraordinary transactions, like revenue and expenses, as well as analyzing their effect on the overall financial position of the church make up the accounting function.
Accounting services for churches can perform bookkeeping tasks, preparing and analyzing financial statements, training, accounting software, audit preparation, and more.
Benefits of Outsourcing Accounting Services for Churches
Churches fulfill their mission by collecting revenue from different sources, including congregational tithing, grants, donations, fundraising, and others. Some funds are given with restrictions about their intended use, while some are given unrestricted. Because of the way funds are received, churches rely on fund accounting to accurately account for the uses of received funds.
Fund accounting focuses on accountability, not profitability, so it differs from general accounting. Using an accounting service for church financial services is the best way to follow generally accepted accounting practices (GAAP) as well as benefit in the following eight ways.
Save money and time by using efficient bookkeeping software
Bookkeeping is necessary for a church to remain operational, but it is a tedious task that requires a staff member skilled and trained in accounting practices. Accounting software is a helpful tool to save time, but too expensive for many nonprofits to use. An accounting service can provide access to efficient software without overcharging for unnecessary software or services.
Keeps financial records up to date
Most churches plan to prepare financial reports monthly, but many admit to being months behind on complete reporting. Closing the books and reviewing transactions close to the end of the period allows for mistakes to be corrected quickly before they affect cash in a negative way. Having accurate and current financial records on hand at all times is also the best defense against improper fund allocation allegations and may be required for donors, members, and other supporters at any time.
Handles bank reconciliations
A reconciliation of each bank account should be completed every month, or quarter, depending on the financial institution’s statement timing. The idea of the reconciliation is to match each transaction on the bank statement to each transaction on the internal general ledger. They make sure all checks and payments are accounted for and posted for the right recipient and amount. They also make sure all revenue or donations are recorded properly.
Using a Church Accounting Service allows the expenses of the Church to be monitored on a larger scale. Accurate and timely reporting and reviewing of financial records allow expenses to be recorded and also analyzed for inconsistent trends or any issues in cash flow. By outsourcing this task, areas for concern can be tended to before they cause financial stress.
Reduced risk and prevents fraud
An organization is at a higher risk for fraud or theft if the same employee that is handling day-to-day tasks like paying bills and depositing funds, is also reconciling and reviewing the financial statements. Outsourcing functions of the accounting department ensure that all transactions that were made had the proper approval and support and were documented.
Responsible for financial reports and payroll services
The accuracy of financial reports and payroll data is the responsibility of the church but can be a very complicated process. Payroll transactions are often recorded incorrectly because the expense code or timing of the liability is not correct. Using an accounting service will allow the organization to compile all reports and ensure that transactions are coded correctly and recorded in the correct period.
Better insight into the financials and giving
Having accurate and current financial reports allows for better insight into the financial position of the church. Experienced accountants are more prepared to spot discrepancies and make sure they are addressed before they are an issue. Since much of a nonprofit’s revenue comes from contributions, outside accounting experts can also monitor and report on giving trends as well as prepare contribution statements.
Easier tax preparation
Using an accounting service for tax preparation can ensure crucial deadlines in compliance with all federal, state, and local laws are met. When regular accounting functions like payroll and reporting are handled by an accounting service the preparation period for tax preparation becomes much shorter and easier.
You can be a better steward of the resources
Contributions must be recorded and tracked so that it is ensured they are being used for their intended purpose. Accurate accounting practices help keep track of all resources and document spending. With the proper allocation of the resources on hand, new resources can be managed more efficiently.
Using a church accounting service will benefit the organization in numerous ways. When seeking out an accounting service, it is important to choose accountants that are familiar with nonprofit organizations, and specifically churches. The right accounting service will act as a partner to your church working in the best interest of the mission.
Set up a conversation with our experts at JFW Accounting Services to get your church’s finances on the right track.