This post was last updated on March 16th, 2021 at 12:44 pm.
Does your church use multiple checkbooks to track money? Were the checkbooks opened when a new church purpose was needed? Are you tired of reconciling multiple checkbooks? Why does an organization have so many checkbooks?
All of these questions and many more should be answered by any organization that is using more than one checkbook in their church. While there may be some exceptions, most organizations should be able to do all their accounting in one checkbook.
How did churches come to the point of using so many checkbooks? Many times it was because churches needed a way to separate money by the purpose for which it was collected. Sometimes it’s church politics. Whatever the reason(s) were in the past, there’s no reason for multiple checkbooks with today’s software offerings. Today there are many options for software that will give this fundamental need for churches and other nonprofits, including IconCMO.
How can a church keep its money separated in one checkbook? Simple – it’s called Fund Accounting.
Today most software can easily do this without using classes which has limitations in reporting fund balances. Consolidating all the transactions into one checkbook, makes reconciliation easier for the treasurer and reduces mistakes. For example, if the checkbook has 1,000.00$, then every dollar is allocated to a fund and no other fund has control of it. For example, the General Fund could have 600.00$ and the Youth Fund could have 400.00$, totaling 1,000.00$. Think of it this way — within the checkbook you have “independent” balances for each fund, which then totals to the overall checkbook balance.
For a more detailed explanation you may want to read one of our other blog post on how checkbook and expense accounts along with funds all interact with each other.
Why’s it important? Church and other nonprofits need to have the ability in their financials to check how each ministry is doing. Are they financially healthy or not? For example, the Youth Minister needs to know how their ministry is doing on revenue and expenses. This is provided by the ‘Statement of Financial Activities’ (PL Sheet). They also want to know their asset balances and liabilities in the checkbook which is provided by the ‘Statement of Financial Position’ (Balance Sheet).
Each fund should be able to give you separate financial statements which does not include other funds’ activity. Additionally, each fund should have the ability to have a stand alone budget to see how well the money is managed within the fund and have the ability to merge for the entire organization’s budget. Essentially, the funds are allowing another level in the reporting structure aside from the Chart of Accounts.
In summary, having multiple checkbooks typically means the organization may not be using their software in the best way to facilitate their accounting practices, efficiently.