My house was built in 1988. Not quite old enough to designate my tract home as a historic landmark, but it is well on its way. Like everyone else in my neighborhood, we accept renovations as a necessary part of homeownership. A few months ago, my wife and I finally decided to address the issues in the guest bathroom. The linoleum flooring was starting to separate, the walls needed a fresh coat of paint, and the cabinets were looking pretty weathered from 33 years of steamy showers. I’m not Chip Gaines, but I thought things were going fairly well until it came to the flooring. Frustration set in every time I tried to cut one of the vinyl planks. They kept cracking, breaking, and chipping with every attempt to modify the shape to fit a specific area. Even worse was trying to put on the new baseboards. I could not countersink the nail to save my life. I’ve always said things like putty and paint make me the carpenter I ain’t, but the truth is I didn’t have what it takes. Successful home projects require what I call the three T’s – tools, time, and talent (if you want, you can tack on a fourth – Treasure). I quickly learned that without the right tools, projects are more frustrating, take longer, and have less than desirable results. The same is true when trying to put together a church budget. Having the right tools, and knowing how to use them, can make all the difference. Two of the primary tools needed to craft a successful church budget are bookkeeping software that can provide insightful reports and spreadsheets that take care of the calculations.
Bookkeeping Software
In many ways, a church is just like any other business. They need to track their income and expenses, pay bills, produce invoices, and generate reports to know their financial position and cash flow. The good news is that there are several options out there for churches. In addition to non-church professional accounting software packages for small businesses like QuickBooks, FreshBooks, Xero, there are several church-friendly options like Blackbaud Financial Edge, PowerChurch Plus, ACS Technologies, Aplos, and so many more. According to Elizabeth Wasserman at Inc., the key to selecting the right software for your church is understanding your church’s specific accounting needs. Wasserman recommends talking to your accountant and staff, knowing your budget limitations, and creating a wish list of features you want. Many church account software solutions integrate tracking donation records and performing bookkeeping tasks. Regardless of the accounting software used, when it comes to church budgeting, the software needs to generate reports that provide meaningful data that aids in creating the budget target and history of expenses. Start by using these three essential reports when creating a church budget.
Essential Reports
- Budget vs. Actual – This report provides the actual revenue and expenditures and compares them to the budgeted amounts for a defined period. This report is fundamental when building the budget target; it provides necessary historical data to determine income and expense trends.
- Statement of Financial Position – This report provides additional non-expense cost data required in the budgeting process. A great example is the principal portion of the mortgage. The interest on a mortgage payment is in the Budget vs. Actual report as an expense. But because the amount designated to the principal reduces the liability, it will not show up on the Budget vs. Actual report. The bottom line, the entire mortgage payment needs to be budgeted.
- P&L (Profit and Loss) – This report provides the church’s total income, summing up revenue and business costs to find the net profit for a given period.
Spreadsheets
As an accounting clerk in the 80s, I remember using ledger sheets and a 10-key to reconcile accounts. It took four clerks almost three days to complete the month-end tasks. Then the miracle of the personal computer arrived. I remember convincing my supervisor to give me a week to set up the reconciliations on SuperCalc, a DOS-based spreadsheet app that worked on Windows 3.1. Once I set up the spreadsheets, what used to take four people three days, took one person one day. That’s the power of using a spreadsheet to perform routine calculations in a fraction of the time. Thankfully, technology has come a long way since then, and there are multiple options when it comes to spreadsheets: Microsoft Excel, Apple Numbers, Google Sheets, and OpenOffice, to name a few. Using a spreadsheet to produce the initial church budget promotes efficiency and accuracy. I highly recommend investing the time to set up the church budget on a spreadsheet. As you set it up, think of ways to minimize errors by using formulas to calculate totals, differences, and percentages of changes. You will be amazed at how quickly you can make adjustments and compare different scenarios in your church budget.
When the time came to remodel the next bathroom, I added new tools, like a nail gun to finish the baseboards and a jigsaw to cut the floor tiles. In the same way, using the proper tools like the right accounting software and spreadsheets to put together the church budget makes it a far more enjoyable experience and produces better results.
short url:
