Why Use a Church Accounting Software?
Why is it necessary to have a church accounting software instead of just using any conventional accounting programs? This question will undoubtedly come up when the church treasurer or anyone in the church suggests updating a church’s accounting system.
A church or any religious institution needs an accounting system different from those used by other organizations. It also must use accounting software that suits its money management needs. Why? Because a church is not a profit-oriented group.
Simply put, a non-profit organization like a church is an assembly of people that gives services to others without aiming for profits. Also included in this group are religious organizations and their affiliates such as schools, stores, shelters, clinics, and cemeteries owned by churches. Although a non-profit group can earn profits from its programs or activities, none of its members should enjoy the profits or bear the losses that may arise. Non-profit organizations often accumulate assets from sources that expect no payment in return. As a non-profit oriented organization, the church is exempted from local, federal, and state taxes.
Anyone who gives a donation to the church can use this as a deductible on income tax. However, most donations of a substantial amount that is given to the church come with specific instructions as to their allocation. For example, a donation was made for funding missionary work, building a new church, adding to the scholarship fund, running the soup kitchen, or for a specific church activity or project. Due to this, churches utilize fund accounting practices.
There are two types of church funds in the accounting system: restricted and unrestricted funds. Restricted funds refer to the donations or contributions that are intended for certain allocations such as those mentioned above. In contrast, unrestricted funds are spent for the overall operational and administrative costs of a church. The sources of unrestricted funds include regular tithes, offerings, and contributions. The restricted funds must be clearly distinguished from the unrestricted funds in the financial records of a church. The funds under each of these categories should be differentiated from one another as well.
Though it would be convenient to open a separate bank account for each fund, it is not required. It also might be more tedious in the long run to keep track of all the bank accounts as projects and donations are added to the list. This is where the need for a church accounting software comes in.
A church accounting software primarily allows easy and convenient accounting of church funds. This software is designed to meet the specific needs of a church’s accounting system. With an accounting software, various church funds are given their own bank account numbers. The accounting software offers an option to maintain individual cash flow entries under each account number of church funds. Apart from that, the accounting software can easily prepare and create reports for every fund. The financial reports can be accessed simply by clicking a button. So one can access and print the reports on some or all the church funds at any given time. That is why an accounting software designed for church accounting systems can be a valuable asset.
