I took on a new client last year that had NOT tracked their income, expenses, assets, or liabilities since they started over 10 years ago. They used their bank statements each month to tell them how much money they had.
Inputting their history was a hard and time consuming task =(
Your bank statements are not enough. You can not make good financial decisions looking at a bank statement. You need a simple but effective accounting system that will generate the reports you need to make sound financial decisions. You may also need to produce at least an income statement and a balance sheet for 3 years ...if you ever have to borrow money, which is why this client hired me.
Please understand that complex and elaborate accounting systems that produce reports on everything including the kitchen sink are not always your best option. If it takes months to teach a new staff member how to use it...it is not an efficient system. Sadly, you may end up with an unusable accounting system somewhere down the road if something unexpected happens to the only person that knows how to use it.
So keep it super simple! If you are a very small organization, spreadsheets may work fine for you ... as long as you are reconciling them to those bank statements!
But for those of you that are a bit bigger and need a more robust accounting system, a good double entry accounting software is the way to go.
Since I have received a lot of inquires since the first of the year on what software I would recommend ... I am going to post my reply to one such inquiry:
"I am evaluating and deciding between QBO and Aplos for our church.
However, after researching Aplos, I am considering it for its straightforward fund accounting. There must be benefits to using a system specific for churches. My hesitation on Aplos is the dependency on PEX to have receipt capture and reporting capabilities. I really like that the receipts feature with QBO.
Especially now that QBO has introduced the tags feature, is there any reason you would recommend away from using QBO?"
Depends on your needs. Here are some differences:
1) QBO has a bigger more robust reporting capability than Aplos...but I do NOT like tracking donations in QBO (you have to add each one as a sales receipt and the annual statement is "ugly").
So, I recommend my clients use something like Planning Center that will track both online and offline donations ...when they are using QBO for their accounting. (Over 60% of my current clients use QBO and most of them got it "almost" free thru Techsoup.) I also like the free receipt capture tool in QBO=)
HOWEVER...I have seen some really messed up QBO files! Since it is created for "for-profits" ...you have to know how to set it up to use for a church or nonprofit. If you go that route I would recommend Lisa's book to help you get the "foundation" right (you can use FCA for a 10% discount).
So if you want a simple easy to use "all in one"...Aplos is the software for you =)
The donation part of it integrates with the accounting and auto adds the deposits. Tracking funds is much easier as well. I have not used PEX ...so I don't know much about it, but have used Divvy with QBO and REALLY like it! If you would like to learn more about it...I can connect you with my Divvy rep for a
One more thing to note: Tags in Aplos is $30 extra per month...but in my opinion ...a MUST! I like them better than QBO tags as you can add them to each "line" in Aplos and only the whole transaction in QBO. Reporting with "tags" is easier in Aplos as well.
See more tips on setting up an accounting system...
Reporting housing allowance incorrectly can have an adverse affect on your minister's tax obligations!
Please read this reader's post:
"I have previously read "do not include clergy Housing Allowance in Box 1 taxable income" so I know that's the recommendation.
However, if this does happen (our payroll service created W-2's including it in box 1 but not box 14) will it cause problems, as long as the pastor can deduct the appropriate amount from taxable income reported on SE forms? Pastor is aware of the approved amount, and has a letter of documentation."