Pros & Cons of Changing Banks

I’m a proponent of using a locally based financial institution for your banking needs. National banks should be for national companies (Red Cross, Apple) but most churches can be served effectively by their local bank. Local banks are usually cheaper (fees are less) and are far more helpful because their leadership lives in the community.

Here is a list I drafted recently for a church that is considering changing banks. I encourage your finance committee to consider moving to a local bank (if you’re not there already).


  1. LMNOPbank is headquartered in our community so we’re supporting a local company.
  2. LMNOPbank has a much better reputation for customer service.
  3. LMNOPbank is where the church’s endowment funds are invested so all church funds would be in the same institution.
  4. LMNOPbank is easier to change signatories – take the signature card to the church and get everyone to sign, and then return the card to the bank. SunTrust requires all signatories to appear at the bank on the same day.
  5. Our current bank’s customer service rep for us is located in their HQ which is not located in our state.
  6. LMNOPbank has a courier service which picks up deposits in the church and takes them to the bank.


  1. Changing banks put a LOT of work on the finance office
    1. Changing all auto-draft payments
    2. Changing payroll drafts
    3. Changing online giving
  2. Changing bank has a cost – buying new checks and deposit slips.
  3. Reconciling several bank accounts for a while.
  4. Waiting for checks to clear from the old bank account.

 Treasurer’s Recommendation: move to LMNOPbank as soon as possible

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Considerations When Getting a New Copier

  1. Start the process of getting bids for a new/replacement copier about 4-6 months before the current contract expires. It will take about 2-3 months to get the bids in and make a decision. Take delivery of the machine within a month of the end.
  2. Do NOT let a new vendor “eat” the current lease. They won’t eat it, they’ll just add it to the monthly bill. Let the current lease expire or come within 2-3 months of expiration before getting a new one.
  3. Ask other churches for references of companies and copiers they like. Ask those for bids.
  4. Remember, a copier is a commodity. There is essentially ZERO difference between today’s machines. THE difference is in service. Thus, when getting quotes, it is vitally important to talk with the VP/Director of service to ask about the number and types of problems that each machine has. The VP of sales will give you a nice pitch (that’s his/her job) but the VP of service will shoot straight(er).
  5. Get a 48 month lease; 36 months are too expensive and 60 months are too long. By month 42 people are ready to get a new machine; around that time, many machines start breaking down more frequently.
  6. Get a quote for the base model and then get quotes for the add-ons (hole punch, staple, saddle stitch, etc.). Most machines do 11×17; desktop copiers can’t do that but 99% of office copiers do bigger copies.
  7. To figure out how many copies you current use in a moth, ask your current vendor for that info. Most copiers today let the company login and billing info such as how many B&W versus color copies were printed that month. When you ask the company for the totals, let them know you’re putting this contract out to bid. When they know they may lose their copier contract, they’ll work harder to keep the contract.
  8. Get info from the current copier company about the cost of returning a machine if you don’t renew with them. Some companies charge a shipping fee (I’ve paid $750) for old machines. Make sure the new lease doesn’t have that clause.
  9. Financially, I was most satisfied with the leases that made you pay for the copier plus the actual number of B&W/color copies. The old method of building in X thousand copies was simply a way to pad the monthly base fee.
  10. You should pay somewhere in the range of 2/10ths to 1/2 a penny per B&W and 3 to 5 cents per color copy. Anything more than that is wrong.

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Idle Cash

Every church should have one bank account and one investment or money market account. Anything more, except in special circumstances, is unnecessary. Here’s how I feel it should work.

The checking account is where all money is deposited as it is received. All money – no exceptions. The money market account is where the church’s “extra” money sits until it is needed. I know – there is no such thing as extra money. Here’s what I mean – the average church needs about 60 days’ worth of cash in its checking account, at most 90 days. All cash over that should be moved to a money market account where it can earn a little interest.

Then, as money is needed in the checking account, it is transferred from the money market account. And, as the church receives “extra” money (think the December rush) it is transferred to the money market account.

This keeps the church with a solid balance in the checking account and its “idle cash” is earning interest which can be used for the church’s operations.

What are the exceptions? Glad you asked. Here are a few and I’m sure you’ve got others:

  • A capital campaign where you want to have a checking account for that campaign. I suggest you also have a money market account for that account. Then, as you receive the initial, pre-construction influx of money the bulk of that is moved to the money market and then, when the construction bills arrive, the money is moved to the campaign checking account to pay the bills.
  • An account which is used only and entirely for pass-through funds and by having that checking account it will help the bank reconciliation be cleaner and clearer. Here’s an example:
    • An account which is used to receive online gifts from an auction or sale of materials. Having this account means you can more clearly determine a sale versus a gift that in the main checking account. E.g., you receive $20 in the “sales” account you’ll know that was for a book or retreat versus a tax-deductible gift.

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PPP Loan Accounting (corrected version; percentage used for payroll v others)

The SBA is still working on how PPP loans should be reported back for forgiveness. The SBA made changes to the PPP loan guidelines at 9 p.m. the night before the PPP began; they will continue to make changes to the PPP for the duration of the program. In the meantime, there are some accounting practices you can do to record your PPP loan. Once you receive your loan, you have 8 weeks to use it for payroll (at least 75% of the loan), utilities and mortgage interest (no more than 25% of the loan).



Keep it simple is THE principle. You need to create two new accounts in your chart of accounts. One is a restricted fund on your balance sheet and the other is a new revenue line in your income statement.

  1. New restricted fund – reasons to have this:
    1. That account will show at any given time how much you need to use before the 8 weeks are up.
    2. If you need to return the money, then it is on your balance sheet and not on your income statement.
    3. If you post the entire amount on your income statement at once, it will skew your income for that month.
    4. So that you can show your banker how you used the money explicitly for the intended purpose by gradually transferring money from the balance sheet to the income statement.
    5. Some banks are asking you to open a new bank account but you don’t need to do that, especially since the money will (hopefully) be gone within 8 weeks.
  2. New revenue line – reasons to have this:
    1. The loan is a significant amount of money and you don’t want that amount comingled with your tithes and offerings.
    2. You need to be able to see months and years later what the amount was, especially when your audit comes around.
    3. You can use this revenue line to prove to your banker that you used/transferred funds to your income statement and the funds matched exactly the payroll, utility bills, and mortgage interest.
  3. Receiving the loan
    1. Accounting: enter the loan as a debit to your bank account and a credit to the new restricted fund.
    2. That’s the only credit entry you’ll make to that account – just one deposit. The rest of the entries are withdrawals when the money is used and transferred to the income statement.
  4. Spending the loan
    1. Accounting:
      1. When you make the payments, make a copy of each invoice and payroll register
      2. Then, make a journal entry transferring that exact amount from the balance sheet to the income statement (debit to the new restricted fund and credit to the new revenue line).
      3. That’s it. You’ve now accounted for how you used the loan.
    2. You won’t have any changes to your expense accounts. Pay your payroll, mortgage interest, and utilities as usual and record them as usual. You don’t need to do anything different.
  5. Record keeping: this is the most important step; without this all your work is for naught.
    1. Keep a paper folder with documents (payroll register & summary, health insurance, retirement invoices, utilities bills, mortgage statement, etc.) which can be shown to your banker to get your loan forgiven. You may need to highlight on your payroll summary which items you’re using toward the loan to avoid the mandate to not include FICA.
    2. Keep track of all your expenses, label the heck out of them – write on them the specific posting number from your accounting software or create a system. You want your banker to be able to look at your documentation and within 5 minutes say the loan is forgiven.


Again, keep it simple. Your banker is currently busy with the second round of PPP loans but at some point (before the final visit) have a checkup with your banker to ensure she or he knows what you’re doing and is good with it.


Lead On!


Pros & Cons of Changing the Fiscal Year

Changing a church’s fiscal year away from a calendar year is hard. Usually it requires changing the constitution and that alone means multiple presentations to the church membership. It also requires changes in the budget year, the way committees and teams plan and spend, the way the Finance Committee reports to the church, etc. But it can be beneficial to the church’s finances and not ending December with “will we make it” mentality.

I recommend a church do an analysis to determine the cost/benefit of such a change. Here are some points to consider.


  1. Allows the church to use the end of year gifts into the next year.
  2. Avoids the “Will we make it?” mentality associated with getting end of year gifts and all that uncertainty.
  3. Moves the budget process to the spring instead of the summer and early fall.
  4. Aligns the fiscal year with the school year which in society is the beginning of the year.
  5. Allows TCCC to have their fiscal year aligned with their school year.
  6. Pushes the year-end financial reports away from January and the requirement to get that done even if staff is sick or the weather is bad.
  7. Moves the year-end and year-beginning work on the creating/storing folders and files; inputting new budget into the financial software; adjusting personnel wage changes in payroll; etc. away from the holiday season.
  8. Every five years allows the audit to be done during the low auditing season. High season is tax season (February-April).


  1. A lot of work initially to adjust the fiscal year, the budget, and communicate with all the vested parties and get their input on the process and its desired outcome.
  2. Affects several committees/teams and changes some routines:
    1. Admin Board and Finance – new budget timeline, end of year reporting, etc.
    2. Personnel – affects when salaries are changed and reviews are done
    3. Constitution – requires a constitutional change
    4. TCCC – moves their budget
    5. Nominating – may affect them (uncertain about this)
  3. Moves away from a clear fiscal year = calendar year.
  4. There is still a last minute, year-end rush to get gifts which still keeps the staff busy at Christmas, New Year’s, and the first few weeks of January.

 Treasurer’s Recommended Fiscal Year: August 1 through July 31

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Fixed Assets

I take these off every balance sheet I possibly can. There is no reason for a church (or any other non-profit) to track their fixed assets (land, buildings, and furnishings). CPAs will tell you these must be included on a balance sheet and that is simply not necessary for a non-profit.

Fixed assets are usually listed on a balance sheet for the price they cost. If a building costs $1 million, that is the figure it is listed on the balance sheet. Same for furnishings, building improvements, etc. This figure is what it cost at the time of purchase and that is my hang up. Church pews that cost $100 each 50 years ago now have a replacement price of $2,500 or whatever. Yet, on the balance sheet it is listed as $100 less a full-depreciation of $100. That doesn’t mean anything to the average church member reading a balance sheet. Fixed assets never reflect the current amount of money you need to replace that tangible asset and that is the short-coming a fixed asset and depreciation policy and why it can actually harm a church. People will presume it costs $1 million to replace the church’s fixed assets (which were bought 18 years ago) when the true cost is closer to $5 million.


Instead, do this. Remove all fixed assets from your balance sheet. Then, when you do your annual audit or present the annual financial report to the church, have a footnote in the document in which you list the insured value of the physical plant and the furnishings and add in the tax value of the property (land/soil is not insurable because it can’t be destroyed). This footnote tells the reader the current value of what you own (presuming you keep your insurance value updated).

Finally, take a camera (such as your phone) and record every room, every cabinet, every drawer, and every space in your building. It is so easy to do with modern smartphones. Two people can do an entire church in a morning (or a day if it is a very large church). Then, store that recording in different locations or in the cloud so it can be used if need for insurance purposes. Keep multiple years’ recordings, too – don’t discard one after you get a new one.

Please keep your balance sheet simple – no fixed assets, cash only, and keep restricted funds to as few as possible. Thanks!

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Cash Balance Sheet

Cash is King. Especially in non-profits. I’ve spent too many hours trying to get CPAs to understand that in non-profit accounting, there is no need for the balance sheet to list fixed assets, pre-paid expenses, depreciation (in any of its myriad forms), and other forms of for-profit accounting. Sometimes the CPAs get it and follow my lead. Other times they are so entrenched in their methods that they can’t think outside the AICPA lines.


A cash balance sheet means that the only thing on the asset side is your cash and where it is located (E.g., “Main Checking-1st National Bank….$47,738.83”). This is known has “how much money do you actually have available to you as of the date of the balance sheet.


And, please, please, please include ALL your accounts at ALL your financial institutions. I’ve worked with too many churches who tell me they’ve listed everything only to learn later that there is a discretionary fund, an endowment fund, a benevolence fund, etc. that someone doesn’t want others to know about. That is being dishonest – plain and simple. You’re not revealing the whole truth because someone doesn’t trust others. That is wrong.


The other side of the balance sheet is divided in two:

  • How much of the cash you have is encumbered for others?
    • What are your payroll liabilities (money you’ve withheld from employees which you’re going to send to the Federal and State tax authorities, to the employees’ retirement, health or life insurance, or other benefits. That money isn’t yours; you’re just holding it for a little while.
    • The other “liability” is commonly known as restricted funds. Again, this money isn’t yours, you’re just holding it until it is used for the purpose that the donor gave it for. That may be for the music program, for a building campaign, or for benevolence. Whatever it is for, you MUST use it for that purpose and nothing else unless the donor gives you written permission.
  • How much of the cash you have is “left over?”
    • That leftover is known as retained earnings or net assets. That money is truly under the full authority and control of the governing body of the church whether that is elders or the congregation.

A cash balance is simple and that’s the way it should be for churches. You want a document that is clear enough so that a non-accountant can understand it after a 5-10 minute explanation. If you have to go longer, then people are going to think you’re hiding something – and you just might be. Keeping it simple keeps it honest.

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End of Calendar Year Gifts

When it comes to end of year, you need to have careful attention to some details:

  • What is the date on the check?
  • When did it come into the possession of the church?
  • When did it cease to be in the possession of the donor?
  • If it was mailed, what is the postmarked date (and keep the envelope for future reference)?

The IRS says that you can give tax credit for gifts that are not in the possession of the donor as of 1/1 @ 12.01 a.m. So, if someone makes an online donation at 11:59 p.m. or earlier on 12/31, then the gift can go toward that year.

If someone puts a check in the mail on 12/31, then it is no longer in the possession of the donor. The IRS considers it valid for the prior year. It may be postmarked in the new year but it should go toward the prior year, unless the check is dated for the new year. If the postmarked date is January 3, 4, or 5, use your best judgment to decide if it was still in the donor’s possession in 2019 or if it was mailed in 2018. You may even need to call the donor.

For depositing money received in the new year but credited to the prior year: make the deposit to the bank as early in January as possible; in your accounting software put a deposit date of 12/31 so it will show up on the income statement for the prior year. It will show up in the bank reconciliation as a “deposit in transit.”

The date that the money is in the bank is not important; the date that it ceases to be under the control of the donor is. Dealing with stock gifts at this time of year is especially tricky in determining what year to credit it to because you have to factor in when the donor gave instructions to the broker to sell the stock. Talk with the donor and the broker to ensure you have accurate info regarding last minute stock gifts. 

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