Why the Need for Church Accounting Software
Why does a church need to use a church accounting software rather than just making do with traditional accounting systems? For sure, this question will be asked if a church officer or any parish member advises that the accounting system of the church be updated.
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.
A non-profit organization is defined as a group that aims to deliver goods and services without profit. Classified as non-profit groups are religious organizations and church-owned entities such as stores, clinics, adoption centers, schools, and cemeteries. Non-profit organizations can earn income because of their various activities. However, no member is allowed to get the profit or loss incurred from a certain activity. Usually, the assets of non-profit organizations come from people or groups that do not expect any payment in return. Because churches are non-profit groups, they enjoy tax exemption at the state, local, and federal levels.
People who give contributions to the church may opt to deduct them from their income tax. Majority of big contributions provided to the church include instructions on how the funds should be spent. A contribution may be used for scholarship fund, missionary activities, building a new church, renovating a church, or any church project or event. For these reasons, churches need an accounting system for managing their funds properly.
An accounting system categorizes funds as either restricted or unrestricted. Restricted funds are provided with a certain purpose in mind such as the examples mentioned earlier. On the other hand, unrestricted funds refer to the money regularly collected from tithes, donations, or offerings. Unrestricted funds are usually spent for church operation and administration. The difference between of restricted and unrestricted funds, as well as the spending of these funds, should be clearly indicated in the accounting records of the church.
Churches are not required to open a bank account for every fund. However, it is a good way to make handling church finances much more convenient. Tracking down all bank accounts can be very challenging as donations and other church projects that involve money are recorded each day. That said, using a church accounting software is necessary for ensuring proper recording and monitoring of church funds.
Basically, church accounting software makes fund accounting simple and easy to implement. This specialized software is designed with features flexible to the special needs of this kind of accounting system. Using the software, different funds can be assigned their own account numbers. The software can be programmed such that under each of these account numbers, separate cash flow entries can be maintained. Additionally, the corresponding reports for each fund can be prepared and generated easily with just a click of a button. This means that at any given time, summaries of a selected or even all of the funds’ records can be extracted and printed out.
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