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Choosing the Best Accounting Software
By: Marla Becker

Many church treasurers still keep manual accounting books. Others believe that any commercial accounting package will do. Some are even using home checkbook-type programs to do church books. These all seem like logical choices—so, why aren’t they?

Why are traditional accounting books, commercial packages, and personal finance software programs often not the most cost-effective and time-efficient paths to take to record church finances?

To understand the ramifications of this question, we need to understand the difference between a commercial or personal accounting system and one specifically designed for churches.

Basically, it is a matter of “funds.” So, what exactly is a fund and how is a fund accounting program different from commercial or personal accounting?

Here’s an example. When you receive your $100 electric bill and write the check and send it off, you do not tell the electric company what to do with the $100. However, when you give $100 to the church, you may inform them to put $50 toward the operating budget, $25 toward the renovation of the organ, $10 to a missionary, and $15 to the local food pantry.

These four divisions of your gift represent the funds to which you are donating money. A good church accounting program has a method that keeps these monies separate, so tracking and reporting on them is a breeze.

The Word “Fund”
A confusing part of setting up a fund accounting system is to understand the word fund itself.  A fund is not an asset account: a checking account or savings account. The definition of a fund is “an accounting entity that needs to be kept separate, having its own source(s) of income and its own expenses.”

The Building Fund committee chair wants to know exactly how much money is in the building fund – how they started the year, what money came in, how much they spent, and what remains. The Organ Fund chairperson needs to know the exact same information but for the organ fund. The same is true for the Memorial Fund chair and down the line.

Each wants their fund information kept separate from the others. However, this does not mean that the money itself must be stored in different places.  

All of the money for each “entity” of the church can be stored in one checking account or many different asset accounts. In a recent training class, we had representatives of a large church with a multi-million-dollar annual budget. They set up 30 different funds, but they only had one asset account—a checking account.

Conversely, another church’s financial setup had three funds and 15 different asset accounts, including checking, savings, money markets, CDs, and stock accounts. By looking at the Fund Balance accounts, they could know how much money was available in each fund regardless of where the money is stored. A helpful report available in a Fund Accounting software package is a Fund Activity report, which includes each fund’s beginning balance, income, expenses, and ending balance.

Audit Trail
Many churches today still use either a manual accounting system or a personal accounting program. One of the dangers of these methods is that, in many systems, you can actually change a transaction. In order to leave an audit trail to satisfy an auditor and also the finance committee of the church, this should not happen! If you make an error, a reversal or a correcting entry should be entered.

Many times, people will call for support on their accounting package and ask if they can simply change something they entered so it appears no mistake was made. Know that the committee and/or auditor want to see the original entry and the correction or reversal and the corrected entry. This way, there can be no doubt about the reliability of the books.

Too often, even in the church, money is “loosely” accounted for or innocently “misplaced.” And, unfortunately, even in the church, dishonest people do try to misuse or embezzle money. A secure audit trail is a paramount consideration when evaluating a particular software program.

Integrated Data
One additional advantage of choosing a church-specific fund accounting program is its ability to integrate data. Information is coordinated among the different modules of the program.

The contribution module looks to membership to get names and addresses of contributors. Information then flows from the contribution module into the income portion of the accounting package. Payroll data is automatically calculated and updates the general ledger.

A program with these capabilities provides ease in handling the church finances and functions to ensure accuracy.

Investigating a Fund Accounting Software Package
The most important consideration of an accountant or accounting software program is producing information/reports understandable by the users so that they may make informed decisions. It should be able to generate fund accounting financial statements, provide a wide range of standard reports for committees, and also be able to generate custom reports.  

Next, look at the capabilities of the program. It should allow for expense and income tracking, budgeting and comparison to budget reporting, and check-writing capabilities. An additional option that could be useful is the program’s ability to export the data to spreadsheets, or the ability to e-mail reports directly from the program.  

Many churches purchase their first program based on cost, but second-time buyers are typically more concerned with a program’s reports and features, as well as the manufacturer and technical support the company offers.  

Ask for references and talk with actual users. Make sure the company behind the program has accessible telephone support, as well as fax and e-mail support. A big plus for many customers is a useful website with online support, product updates, newsletters, and training information.

Take your time researching church software programs. It’s a big investment and one that should “work” for you!

Marla Becker is a vice president at Computer Helper Publishing, creators of the Church Windows suite of church management software, www.churchwindows.com.

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