With spring upon us, most have long-since forgotten our New Year’s resolutions. The start of spring—or tax season—somehow motivates us to tend to the housekeeping projects we’ve neglected. Sure, this can take the shape of some church office and building improvements. It’s also a fantastic time to put some energy into an internal audit of your church finances to make sure you’re truly tracking to meet your goals. Plus, you’ll want to clear the accounting clutter so that it’s easy to keep up with the critical reporting you’d like to prioritize.

To help you get started, we’ve created a step-by-step guide to church financial spring cleaning:

Step 1: Review Your Chart of Accounts

Your reporting should be in line with current ministry needs. It’s a good rule of thumb to go through these at least every three years. Take a hard look and identify programs and reports you no longer need. Check to see if new accounts need to be created for upcoming programs. That way, you’ll be reporting only on current projects.

Step 2: Go Over Your Church Financial Statements

Make sure you are preparing and submitting statements regularly, that all funds and accounts are included, and that everything in these reports is reconciled, including account balances and financial records.

Step 3: Review Church Cash Receipts

Make sure you have protocols for handling offerings delivered or mailed between regular services and that at least two unrelated members of the counting committee present when the offering is counted. Protocols you’ll want to use:

  1. Counters should confirm that the amounts inside each envelope match what’s written on the outside.
  2. Counters should rotate weekly so that different people handle funds from week to week
  3. Two offering counters should be in charge of the offering until it is deposited in the bank or the church safe.
  4. Counters should property identify donor-restricted funds when counting offerings.
  5. Deposits should be made promptly and cross-checked with bank deposit dates to see how long the time-lapse is.
  6. Donor restricted donations should be recorded properly.
  7. Donor restricted funds should only be spent on intended purposes.

Step 4: Review Church Donation Records and Receipt Procedures

Make sure your protocols for handling receipts are being followed. Check for the following:

  1. Do you maintain individual donor records to provide acknowledgment for all donations?
  2. Do your receipts indicate if no goods or services were provided (beyond religious benefits)?
  3. Does your organization issue annual contribution reports to donors? Do you include weekly totals or include each individual donation amount?
  4. Do your receipt statements inform donors of tax deductions and specify how to determine the deductible amount?

Step 5: Review Your Church Cash Disbursements

Church cash disbursements should be properly tracked. Make sure everyone who handles them is up-to-date on procedures. Check for the following:

  1. Do you pay all major expenses by check and reserve the petty cash fund for lesser expenditures?
  2. Do you have written documentation to support cash disbursements?
  3. Are your checks pre-numbered and can you account for all numbers included those voided?
  4. Do you periodically reconcile and add back petty cash based on spending records?

Step 6: Look Over Your Church Bank Statements

  1. Do you routinely reconcile your bank statements and church accounting records?
  2.  Are these reports signed and dated?
  3. Are there checks that are over three months outstanding?

Next Steps

Now that you’ve done some spring cleaning, your church finances should be back on track. You can allow some time for heavier lifts, such as reviewing your savings and investment accounts, equipment records, insurance policies, and accounts payable.

It is critical is use accounting software built specifically for churches when it comes to keeping everything organized, GAAP-compliant, and protecting your church against fraud. Shelby Financials is the industry standard in church accounting. They’ve been providing the #1 most trusted solution for church accounting for 40 years. Meet the people behind the product and learn how their solution can save your church time and money by watching this helpful webinar recording: How Much is Your Church Accounting Software Costing You?

 

For More Resources related to Church Finances & Accounting, read these articles:

ShelbyNext Financials Church Fund Accounting Software [Review]

How Changing Tax Laws Can Impact Digital Church Giving

4 Reasons QuickBooks Isn’t Enough for Churches