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How the Right Church Accounting Software Can Enhance Your Internal Controls
By: Christy Qualle

Religious organizations focus on the spiritual, but they are not exempt from the business task of financial bookkeeping. Keeping track of where money comes from and where it goes is essential in ensuring the stability and seamless operations of your church.

Implementing accounting practices with strong internal controls in churches is an essential discussion to protect the integrity and finance of the organization. It is also not entirely uncommon for churches to close its doors or cut back on its social services because its finances were not properly managed.

It cannot be denied that when money is involved, temptation is also present. Even if you prefer to assume that everyone who works for the congregation is honest and trustworthy, what cannot be assumed is that everyone knows how to properly account for the church’s assets and finances.

The church leader alone cannot be expected to micro-manage the church’s finances. This person may be a great leader, but not great at finances. Plus, there are some essential internal controls that should be implemented so the pastor, or anyone in charge of the finances, does not fall victim to financial mismanagement.

Internal control systems are essentially safeguards that you can establish in your organization to protect its assets and finances. Every section of your organization that deals with finances, such as collecting tithe or paying maintenance costs, should have an internal control process that defines the goals, risks and activities necessary to achieve the goals. When you put all the sections together, you then have an internal control system.

This is where advances in technology become a welcome source of protection, control and efficiency. Using the right church accounting software can greatly increase the effectiveness of your internal controls.

Do You Need Internal Controls In Your Church?
The question now is, are internal controls necessary for your church? The short answer is “definitely.” Here are a few reasons why:

Protect your assets.
Your congregation and donors believe in your mission and trust you with their donations. It is then your responsibility to protect your assets and to ensure that it goes to its intended purposes. By using the right accounting software, you’ll be able to avoid two major possibilities: unintentional clerical errors and intentional fraud.

Increase trust within your church.
Money can often start petty arguments and arouse suspicion, even among staff members. Having a reliable church accounting software with built-in internal controls in place can increase trust among your staff, pastors, elders and members because accounting is accurate, auditing is possible, activity is tracked and everyone is aware of the neutral safeguards to limit mismanagement.

Demonstrate good stewardship.
Accountability and transparency – especially when it comes to God’s money, are absolutely essential in ensuring that the funds are used and invested according to His will. A church accounting software that uses fund accounting will make it easier for everyone to see where the money is going and it is being spent according to its original designation.

Internal controls aren’t only important in businesses and corporations. It is an essential puzzle piece wherever money is involved. There are two kinds of internal controls that you should take note of:

Preventative Controls
As the name suggests, this type of internal control prevents untoward events from happening. These events may range from a simple computational error to something more serious like misappropriation of funds by a clerk.

Preventative controls can also vary in scope, depending on how big your church is or how many people you want involved in your church finances. For example, blank checks can only be valid if signed by one of your high-ranking clergymen. These blank checks will then be kept in a combination safe that the signee has no access to.

Detective Controls
On the other hand, detective controls are meant to detect financial inconsistencies after the transactions have already taken place. This is an important safeguard against future avoidable incidences. Reviewing and reconciling financial statements and records of expenditures on a monthly basis is an example of a detective control.

What Internal Controls to Look for in Your Accounting Software
Seeing the importance of having sound internal controls in place, it’s important to note the potential of using the right church accounting software in establishing or improving your own internal controls.

Here’s how a church accounting software can help:

Fund Accounting
You’ll be able to ensure that your funds will go to its intended destination and easily see how much (or how little) was transacted for that purpose.

Segregation of Duties
Look for a software with role-based permissions for users so a bookkeeper or a clerk can input financial information and transactions to the software, while a higher ranking staff or elder can audit the information but cannot alter it. This arrangement will make monthly reviews easier and improve the integrity of the audit.

Customized Permission Levels
In line with the previous point, additional role-based permission levels can allow the organization to delegate certain tasks to other users, such as entering the weekly giving or updating a contact database, without accessing other parts containing sensitive financial information.

Financial Statement Review
Instead of having to prepare reports days ahead of the review period, accounting software can generate summaries and reports within minutes or give auditors real-time access. You can also be confident that the reports will be filled with accurate and reliable figures.

Activity Log
A church accounting software typically logs all the activities completed within the program so an auditor or administrator can review who logged in and what they did, but not change the activity log. If there are inconsistencies in your financial statement review, you’ll be able to backtrack relevant activities through the activity log, a great detective internal control.

Avoid Alteration of Transactions
Once you have reconciled your transaction reports with your bank, the accounting software will not allow any further alterations with the reconciled transactions to prevent a user from attempting to disguise fraud.

Good accounting practices begin with having effective internal controls in place. Once you are able to create a foundation of financial checks and balances to ensure proper money and asset management, then you’ll be able to ensure that your funds are being distributed responsibly. Using the right church accounting software can make your internal controls run more efficiently and it can greatly increase the accountability of your staff and the transparency of your transactions.

As the leader of your church, it is your responsibility to know how donations are being used. An accounting software is a small investment that you can make to help you stay on top of your church finances. It will also give your staff an opportunity to use reliable tools that will protect them from bookkeeping errors, as well as temptations to use church funds for their own purposes.

The right accounting software will be able to help you in enhancing the internal controls that you have established for your church. The easy-to-use program will ensure that you won’t have to spend more time poring over your church’s financial statements than necessary, leaving you with more time to spend with other important church matters that need your attention.

Christy Qualle is director of communications at Aplos Software, a developer of church accounting software, www.aplossoftware.com.

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