Ingredient One – A Strong Platform

A strong platform for managing the church budget begins with the chart of accounts.  For any non-accountants reading this, a chart of accounts is simply a list of the church’s general ledger accounts used to generate financial statements.  The accounts are listed according to where they appear in the church’s financial statements beginning with the balance sheet and running through the income statement.  The accounts as they appear in the church’s income statement should be an exact replica of the church budget.  Frequently this can be a problem with churches using financial software designed for businesses.  Because the financial statements generated by the software system look like a business, the church will resort to spread sheets to develop a budget.  Unfortunately, this makes mid-stream budget analysis difficult.

A financial reporting system that keeps the church truly informed is the next requirement.  A church should generate timely financial statements (usually monthly) that generate not only results of activities but also a meaningful budget vs. actual comparison.  To be meaningful, the budget must be broken down by month but NOT simply by dividing the annual budget into 12 equal amounts.  Annualize the budget by incorporating the natural trends in all accounting years.  (For example, receipts will be much higher in December than July…)  Also, hardly anyone does this but try to include designated/restricted gift activity in reports.  It’s perfectly permissible to budget for these types of gifts.   

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