The Ultimate Guide to Church Accounting Software
Parishes serve people to help them grow in their relationship with God while being in community with other believers. Many desire to make a difference in the world by blessing their communities and investing their time and resources into the lives of those around them.
Because of the financial processes and unique needs for places of worship, many choose to use an accounting software program specifically designed for parishes. Unlike traditional businesses, nonprofits and faith-based organizations do not operate to maximize profit, so their taxes, credits, and ledgers will look different.
Funds need to be designated and managed. Payroll for staff needs to be monitored. And tithes and offerings need to be tracked. Though some of the accounting requirements of parishes could be regulated with generic business software such as QuickBooks, they will quickly see the benefits of having a system designed for religious associations.
This article will discuss what parish accounting software is and how it differs in comparison to profit business accounting services. We’ll also talk about why you should use an accounting system for parishes and the features and benefits of parish financial software.
What is accounting software for parishes?
Fiscal responsibility, especially for parishes, is essential, and having accounting software that can handle the complex finances of parishes and non-profits is necessary to maximize ministry opportunities and remain compliant when tax season occurs. Parish accounting software is specifically designed for the unique intricacies of ministry finances.
It is similar to traditional accounting software, but it's built to handle everything related to parish finances. It includes features like tracking tithes and offerings, balancing the books, creating reports, organizing funds, and paying vendors and staff.
Good accounting software should also be easy enough for anyone to use. With it, clergy and parish staff should be able to track and manage everything related to the financial aspect of their religious organization.
Differences between parish accounting and accounting for businesses.
Businesses have very different goals in comparison to parishes, particularly when it comes to finances. For a business, their bottom line is profitability. For religious organizations and non-profits, their goal is to achieve their organization's mission. Of course, both need revenue to reach their goals, but faith-based entities use it to serve the people around them.
To understand the importance of church-based accounting software, we need to understand the contrast between for-profit businesses and not-for-profit institutions.
For-profit vs. not-for-profit
As you would expect, a for-profit business is "established, maintained, or conducted for the purpose of making a profit." Business stakeholders are most concerned with the bottom line. At the same time, founders and board members of non-profits and parishes are focused on tracking contributions and allocating funds and resources based on the mission. They don't exist to make a profit, thus the title: nonprofit. Churches and religious organizations fall under this category.
One distinction between traditional companies and parishes is the fact that various individuals and entities can be owners or shareholders of a for-profit business. These owners benefit from their company's earnings because they receive a portion of the revenue or value increases.
Churches are not owned. No individual possesses a percentage of the organization. Under the Financial Accounting Standards Board (FASB), specific accounting principles are in place for non-profits. And each parish is under the financial laws of the state in which it resides - being run by clergy and staff. Because there are no owners, the parish’s accounting system doesn't include owner's equity or retained earnings accounts.
Another significant difference is the idea of fund accounting. Businesses have one general ledger, while non-profits have an accounting method that manages various types of funds. For parishes, this is the emphasis on accountability of where money is going versus profitability. According to purpose, it groups assets and liabilities, which makes donations, or revenue, restricted in their use and can only be distributed for their specific purpose. For example, if a parish is hosting a giving campaign to raise funds for a new building project, any of the money received specifically for that project can only be used for that purpose. The parish cannot use that money to pay for the electric bill or host an event without getting prior permission.
Both businesses and parishes alike can earn revenue by selling goods or providing services. Still, the main difference is that the majority of what parishes receive comes from contributions, like tithes and monetary donations. Because of this, they have to keep track of what money is received and which fund it is being used for. They also have to be able to provide statements to their contributors along with other tax-related regulations.
Terminology used by churches is different than businesses. For example, instead of retained earnings, non-profits categorize them as net assets. Net income is the excess of revenues over expenditures. These uses of varying terms can make it challenging for churches to adopt a secular bookkeeping service to their specific needs. Though it isn't impossible to do, having accounting software designed for churches will help organize everything finance related.
Why you should use accounting software designed for parishes:
It is created for parishes.
As mentioned previously, parishes have incredibly unique needs regarding how they handle their fund management, receivables, payables, and ledgers. Having software designed with the parish in mind can be extremely helpful. However, because of the financial particulars and tax considerations that parishes face, a popular program like QuickBooks can quickly become overly complicated because they do not specialize in non-profits like religious organizations.
It saves time and money.
With a program created for ministry, you can streamline your parish’s financial processes and actions, which will help reduce administrative work and improve efficiency. In addition, parish accounting software will save time because you won't have to convert processes from a traditional business standpoint to fit within FASB principles. Your ministry can also save money and headache by ensuring funds are adequately placed and used for the specified purpose.
Money can be managed from anywhere.
With a cloud-based accounting program, you can gain secure access to your parish finances at any time, from anywhere—view data and reports in real-time. And with automatic data backups, you'll have peace of mind. If someone on your team isn't in the office but needs to balance the books or check the budget, they can do so from any device with internet access.
Import data from existing systems.
With the best parish accounting software, our conversion team can easily import names, vendor lists, and associated addresses, telephone numbers, and email addresses from any existing system by providing us a flat-file CSV or excel spreadsheet. One of the main reasons parishes stick with an outdated, traditional system is because it seems too difficult to switch over current donors and their information. But with the right financial software, importing data can be done with ease.
Features of modern parish financial software:
All companies need a way to track financial data. A general ledger is a record-keeping system that monitors debit and credit transactions. These transactions are segregated by type. For parishes and non-profits, they are generally broken down into even smaller subgroups to keep accurate records.
With parish accounting software, the general ledger should be able to operate true fund accounting that meets the specific needs of that parish. The ledger will simplify the budgeting process because departments and staff can view reports and track how finances are compared. The general ledger in an accounting system designed for parishes will meet the financial accounting standard requirements (FASB117), too.
Benefits of ParishSOFT Accounting Ledger:
- Provides flexible account structure for customized chart of accounts and reports
- Chart of Account Categories aand Excel® import/export
- Automatic deposits from member contributions and pledge postings
- Delivers non-profit reporting that reflects parish ministry
Just because parishes are non-profits doesn't mean there aren't people on staff. It takes a lot of hard work to run a parish and make a difference in the community. With a payroll system designed for ministry, managing payroll, deductions, benefits, special clergy allowances, and personal time is easier because it is made with ministries in mind.
Your payroll system should automatically be tracked in your general ledger, so you don't have to duplicate data entry or do special imports. It is also beneficial to have payroll automatically allocated to funds and departments.
Benefits of ParishSOFT Accounting Payroll:
- Guides the user step-by step through the payroll process
- Handles special clergy allocations and benefits
- Saves costly checks by printing direct deposit receipts on standard copy paper
- Satisfies all your data needs with its versatile reporting system
Accounts receivable represent any money that is owed for goods or services that have already been purchased. This money is usually collected at a later time.
Parish accounts receivablepayroll system designed for ministry help to track invoices, due dates, payments, "customers," deposits, and more. You can get an accurate picture of your true financial position if receivables are connected to your chart of accounts.
Benefits of ParishSOFT Accounts Receivable:
- Boosts productivity
- Streamlines management
- Uses your central chart of accounts
On the other end, accounts payable is any money owed by a company (or in this case, a parish) to its creditors. Whether a business, religious organization, or non-profit, it is the obligation to pay off short-term debt to vendors or suppliers.
Using a true fund accounting system will help your parish gain instant access to the financial information you need. First, track how much and where your money needs to go. Then, connect it to the general ledger to have a solid understanding of the financial status of your parish.
Benefits of ParishSOFT Accounts Payable:
- Secure access anytime, anywhere via the web
- User permissions by function (and fund)
- Automated data backups and software and tax table updates
Having access to financial reports is extremely important for businesses and parishes, mainly because parishes have a wide range of donors, clergy, and financial councils that need to view such reports.
Connecting parish staff to their accounting records is crucial to maintaining accountability and up-to-date financial status.
Benefits of ParishSOFT Accounting Reporting:
- Take the stress out of providing financial statements to those who need them
- Get instant access to your parish financial reports securely on the web
- Satisfy all your data needs with a versatile reporting system
Having a parish accounting system that is integrated with your ParishSOFT family suite and your online giving is critical. It will help streamline all the complicated processes and save valuable time. Be an excellent steward of your two most valuable resources: people and finances.
Reduce the amount and degree of errors caused by manual data input. Reconcile contributions and receipts with online giving and accounting. Track your parishioners and donations in one easy-to-use system.
Benefits of the integration of ParishSOFT Accounting:
- Built to provide transparent financial visibility
- Streamline your existing accounting processes
- Have one system in place for multiple functions
Now that you understand the importance of accounting software built specifically for parishes, you can see how effective it is to have a system designed for ministry. Whether you're just starting or looking to switch, ParishSOFT Accounting can help save you time while being a great steward of your parish finances.
Connect with us for world-class support. We'll get your questions answered, point you in the right direction, and ensure your success. Contact us today to get started!