Chart of Accounts (part 1 of 4)

Posted on February 10, 2015 Written by

A chart of accounts (CoA) is the road map in accounting. It makes processing payments and receipts, creating reports, extracting information, and so many others things much easier. There are several well-established rules for creating a chart of accounts which have been codified by the AICPA (American Institute of Certified Professional Accountants). These patterns means that anyone pick up a financial statement from any company and pretty quickly get the information they’re looking for (presuming the data is in there to begin with). Look at your chart of accounts and see if it follows the rules listed in these blog posts.

 

Accounting uses different names for the same thing. It can be confusing but I’ll give you some of the variations. They’ve acquired these names over the years and in different industries but they mean the same thing.

 

Every CoA has several divisions. The most basic one is the Balance Sheet and the Income Statement. A balance sheet shows all the money an organization has (assets), all the debts it has (liabilities), and the difference between the two (retained equity).

 

You can create as many lines and categories in your financial statements as you need but not too many. Even the largest of churches do not have more than 300 (that includes bank accounts, designated funds, payables, revenue lines, and expense lines.

 

Get to know what each of these mean so that when you’re looking at a financial statement so you’ll know what the difference is between them and what their respective purposes are. Next post, the descriptions of these sections.

 

Lead On!

Steve

Filed Under: accounting, church finances, church financial statements Tagged: , ,

Who Taught Daniel?

Posted on February 3, 2015 Written by

In the Old Testament book of Daniel, there is a story in the first chapter is pretty well-known. After Jerusalem fell to King Nebuchadnezzar, Daniel and his three friends are taken to Babylon because they were the brightest young Jewish men. Babylon was the ruler of the world at that time so it had the best educators and most knowledge. Daniel and his friends were to study at “The University of Babylon” for three years and then take government jobs (verse 5). We presume Daniel and his buds were about 20 years old at the time.

 

Their dorm was interesting: they had all the food and wine they could want. Knowing the times, they probably had access to a nearby harem. It was a college boy’s dream: all the beer, steaks, and women you could ask for!

 

But Daniel and his friends declined. They actually said, “I’ll have the salad, please.” These virile, strong, intelligent young men passed on what every teenage boy dreams of and asked for veggies instead of meat. After a 10-day experiment, their Babylonian supervisor saw that these guys were better off than the others who indulged (verse 15). For the rest of their studies, Daniel and his friends ate according to their wishes and they were ten times better than anyone else (verse 20).

 

We don’t know anything about Daniel’s family. But what I’ve learned about Jewish culture from that time is that children were exceedingly close to their moms growing up. At about age 12, Jewish boys went to synagogue school where they memorized and debated teachings for hours upon end.

 

When Daniel and his friends were faced with a serious test, they relied on their experience – and they didn’t have much of that since they were so young. But they spoke up and said they wouldn’t do what was requested because it went against their beliefs. Who were the persons who taught these four guys to stand up for themselves? Who influenced them so heavily that they would forego every boy’s fantasy? Who inculcated their faith so deeply that they would risk their young lives for salad?

 

We don’t know. We’ll never know. But it does show the value and impact of teachers on young men and women; it demonstrates the lasting effect of a mom on boys and girls. Even when they were a thousand miles from home, with no one around to judge them, and faced with the greatest temptation a young man can have, they instead relied on their upbringing.

 

Here’s to you, teachers of Daniel, Hananiah, Mishael, and Azariah!

 

Lead On!

Steve

Filed Under: leadership, wisdom, young adults Tagged: , ,

Outreach

Posted on January 27, 2015 Written by

Churches are struggling to attract young people. I’ve seen dozens of churches look at this and most of them throw up their hands and do nothing because they don’t know what to do. There are two sides to this, kind of a “chicken and egg” scenario.

First: you need to find the people who you are targeting. I can’t emphasize enough that the target audience for every church should be young families, aged 20s, 30s, and 40s. Those families have young children and teenagers. Those families become the future of the church, especially if they are brought into leadership of the church. Now, where to find them? Frankly, everywhere. These families are millennials and reports I’ve seen say that they do not respond at all to door knocks (like Mormons and Jehovah’s Witnesses) – in fact, they are very much turned off by them. However, it is easy to find them because every Saturday they are at a ball field with their kids. What if your church had a pop-up tent/canopy that went to these events and had a table with free water and snacks for the families and kids. That would say that “we’re here and we’re a family-oriented church.” It gives the volunteers the opportunity to speak to the moms and dads in a relaxed atmosphere. The same could be done at a local farmers’ markets or other community activities – some type of presence where your name is visible to a younger crowd.

Second: this is much, much, much harder. Once you attract families and they actually show up at church, do you have programming that is excellent and of such great quality that the kids AND parents want to come back. You need to have programming that is so outstanding that you get a reputation for being excellent. Excellence will attract people, especially a younger generation.

Here is the conundrum: you need an excellent program (that implies substantial number of kids and young people) so that when you go out to solicit, they’ll have already heard about it and be eager to come. The answer: work on both sides of the opportunity – recruiting people to come and developing an excellent program – so that they support each other and you develop synergy.

 

Lead On!

Steve

Filed Under: budget, generosity, strategy, young adults Tagged: , , ,

Church Cuts

Posted on January 20, 2015 Written by

Churches spend money on three things

  • Staffing: church personnel form the heart and brains in leading the work of the church
    • If you cut staff, you may need to replace with untrained volunteers
  • Buildings are the skin and skeleton of the church that holds everything in place and in its place
    • If you cut buildings, you save on infrastructure but it is expensive to tear down and re-build
  • Programming is the blood and muscle of a church; this is what gives the church energy and motion and dynamism
    • If you cut programming, you end up with staff sitting in their offices and nothing to attract people and give the church a mission

 

Where does a church cut its budget when it desperately needs to cut?

 

My first answer is, nowhere. Instead of cutting, the very first thing you do is to raise income. Do all you can to encourage generosity among your members, show them the results of what they’ve done in the past, help them experience the joy of giving, and let them see the people who have been helped by their tithes and offerings.

 

My second answer is, everywhere. IF you absolutely must cut AND you have really tried to raise funds, then you are at a critical point in your church’s future.

  • It may be time to close the church down. Seriously – if people are not willing to give more to help the ministry of the church, then perhaps it is time for the church to close its doors. Think about it – actually, you probably already have thought about closing down the church.
  • The other option in the “everywhere category” is to cut a staff person, and the programs overseen by that person, and shutter the rooms used by that ministry area (lights, AC, heat, cleaning, etc.). This is an “All of the above” strategy.

 

Often churches cut everything by 10% or 20%. That won’t resolve the crisis because you keep doing the same ministry and programs with the same staff in the same rooms but now you’re trying to do it on the cheap. Ministry on the cheap results in cheap ministry. That is no way to do ministry. Death by inches is what people do when they are afraid to lead.

 

When gangrene sets in and antibiotics don’t stop it, sometimes the only option is amputation. It is dramatic, traumatic, painful, and requires learning a new set of skills. But you can get a prosthetic limb. It won’t be as good as the original but it will give you much (not all) of the same functionality you had before. Churches need to be willing to sever some staff & programs (and close down building wings). Cutting one or two of the three isn’t enough. Decide what is the main focus of the church and provide staffing, buildings, and programming money for that. Anything that isn’t a part of the Main Thing is removed. It might be replaced later but if it is not needed now, it is done away with.

 

Before you cut, raise money. But if you cut, cut strategically and not indiscriminately.

 

Lead On!

Steve

Filed Under: budget, church finances, church staff, leadership, strategy Tagged: , , , ,

Software Packages

Posted on January 13, 2015 Written by
  1. Membership & Financials
    1. There are two big companies are Shelby Systems and ACS. These are very robust financial/accounting systems and a very strong membership/people module. The contributions module in the Membership section posts gift info to individual members and then it posts it to the financial section for a seamless posting of Sunday receipts. Of the two, my preference is Shelby for several reasons which are too detailed to get into here. If you get both and their modules then annual support will cost about $1,500.
  2. Membership Only
    1. Both Shelby and ACS have a membership/people module that can be bought separately from the financials. There are some newer companies that only do membership such as ChurchTeams, Church Community Builder, Servant Keeper, and about a dozen others. The ones I’ve listed are the larger ones. Frankly, this is an area where you get what you pay for.
  3. Financials Only
    1. To my knowledge, only ACS and Shelby do a dedicated church financials software package. I have made Quickbooks (online and desktop versions) work in a church setting but there are some nuances the Quickbooks just can’t handle such as donor gift statements (I’ve had to find a very time-consuming work-around for that). For church financials, I encourage you to look at either Shelby or ACS.
  4. Payroll
    1. Both ACS and Shelby have payroll modules. However, I strongly recommend you outsource your payroll to a national company such as Paychex, CBIZ, or ADP. They file all taxes on time so that you never incur a penalty from the IRS. They cost about $65 per pay period (for up to about 12 employees). Outsourcing payroll is a LOT of peace of mind – knowing you’ll never have a visit from the IRS is a wonderful thing!

 

Lead On!

Steve

Filed Under: accounting, church administration, church finances Tagged: , ,

Church Software

Posted on January 6, 2015 Written by

This is from an email I received: “I belong to a small church and we are looking to update our software. Can you recommend software that is membership/financial based for churches?”

 

My reply:

Your church size is a big factor – the larger it is, the more robust a system you’ll need; the smaller it is, then you can patch-work a couple of systems. Here is some info:

 

Do you want to handle all your financials “in-house” or are you comfortable out-sourcing your financials? For several years I’ve done out-sourced financials for several clients. I’m biased but I strongly encourage you to out-source your financials to a trusted person. With the internet, your financial person can be several states away. All info (bills and even checks) can be emailed for posting by this company. This saves the church in many ways (no office for a person, no computer to purchase, no employee benefits to pay for, etc.) but it costs a little more in terms of straight wages (because the other company has to cover their own benefits & taxes). If you want to go that direction, I can give you a quote and the names of other companies doing the same thing.

 

If you do this in-house, then you have several decisions to make:

  1. Do you want a system that combines both? That will cost more, be stronger and extremely effective in handling your needs, and require initial training plus on-going training of the staff using it.
  2. Do you want to install the software on your own server or have it online? If you put it on your server then you also need to have it backed up and that will cost about $500 or $750 a year. Having someone else host your data online will cost (price varies) but there is a LOT of peace of mind knowing that your data will never be lost.
  3. Training is a must. Every dollar invested in training will yield results in efficiency and effectiveness in very tangible ways. Get the training!

 

Lead On!

Steve

Filed Under: accounting, church administration, church finances Tagged: , ,

The New Age of Résumés

Posted on December 30, 2014 Written by

Second career-seekers are sending out their résumés and making some mistakes. Here are some that I’ve caught. Please be careful with the content of what you say about yourself but also about the formatting. Formatting can tell a lot about you, too.

 

  • Do not send out your résumé in Word format. Save it as a PDF. Word docs can be changed; PDF’s cannot. You don’t want anyone to be able to change your information.
  • Do not include references. If the potential employer is interested in you, you will be asked for references. BTW, employers regularly scan Facebook and other social media to see what future employees say “privately” – be aware of what you post is public and permanent.
  • Do not put your address on your résumé. Put only your phone and email. Addresses can be used to search online for private information. For instance:
    • Google Street View: “drive by” a prospective employee’s home to see if the yard and home is maintained or littered with stuff. That tells a lot about the employee’s work habits.
    • Zillow: look up how much the person paid for the house to see what standard of living the employee has and that might indicate salary expectations
    • Taxes: look up public tax records to see if the person is current in their taxes or has had problems keeping up with that which could indicate whether the employee can handle money well
    • Other ways that are unimaginable to me and you

 

It is a different age now of searching for work than when I began in the pre-internet days but we must learn to adapt.

 

Lead On!

Steve

Filed Under: church staff Tagged:

1.5% Rule for Building Maintenance Budgets

Posted on December 23, 2014 Written by

Maintaining church buildings is expensive. And every year presents known and unknown expenses. Here’s a rule of thumb for determining how much to budget: put into the annual budget 1.5% of the replacement value of your buildings. If your buildings are valued at $5 million, your budget should be $75,000; if $10 million, then $150,000. That amount allows you to keep up with the ever-expanding needs of a church building and maybe tackle some long-term projects in phases.

 

This is in addition to the cost of labor, utilities, insurance, routine contracts (like fire and burglar alarm monitoring or pest control), or other building expenses within your control. This 1.5% is for those building maintenance items which pop up from year to year (sometimes from day-to-day) and for on-going minor building improvements (i.e., replacing ceiling tiles, painting rooms, small carpet or limited asbestos abatement projects, etc.).

 

Here’s a comparison: if your home is valued at $200,000 then you should set aside $3,000 each year (1.5% of $200K). Some years you’ll only replace a carpet or a toilet but every so often you’ll replace the roof or the A/C unit. Over time, you’ll spend $3,000 each year on your home. The same is true for church buildings. To budget less than 1.5% means an increasing list of deferred maintenance items which always costs more than routine maintenance.

 

Use this blog to educate your Stewardship or Finance Committee/Team about how much they should budget for the building. Though they may think 1.5% is too high, when you apply this to their own home, they’ll immediately get the analogy. Finding that money from one year to the next may be tough, but over a period of a few years the Finance Committee can steadily increase the maintenance budget till it is the necessary 1.5%.

 

Lead On!

Steve

Filed Under: budget, buildings, facilities Tagged: , ,
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