There’s a lot to consider when handling other people’s money, and you’re right to take your church finances seriously. There is plenty of accounting software out there to help you meet your legal obligations, but we want to help you meet your moral obligations to maintain transparency and trust among congregants. Even if your church only issues quarterly financial reports, it helps to record expenses every week and review the budget every month so that your reports are in order. It can be difficult to find the right talent given limited budgets, but you can save money by recruiting volunteers, using software and teaching yourself valuable skills.

The Best Church Accounting Software of 2025

In  2018, 29% of church accounting software buyers surveyed said “replace a dated system” was the top reason they needed new software. Simply put, it may be time to replace your current church accounting systems of choice if you find that it no longer meets your needs as a church. Perhaps you need more users to be able to access the program, or it could be that as your ministry has grown, you need more features. When your accounting program is no longer saving you time but creating extra work for you or your staff, it’s time for a change.

Step 2: Create your Funds

Because this one not only catches mistakes but also possible embezzling and fraud. Checks should be written by one staff member while the reconciliation process is completed by another. This is called, “Separation of Duties” which we’ll talk about in mistake #6. Another example of an inappropriate account designation is when making a loan payment and the transaction debits an expense account and credits the checkbook. A transaction like this actually has three disbursements, the checkbook, an expense account, and a liability account.

Do Churches File Tax Returns? What You Need to Know

Bookkeepers oversee your church’s payroll, donation, and expense tracking. The best way to organize the above-mentioned funds is with fund accounting. Fund accounting helps churches sort income by how it’s collected and used. If thinking about church accounting makes you feel a little lost, don’t worry – you’re not alone! While it can be daunting, church accounting is a necessary step to build trust with your congregants and community while adhering to all IRS guidelines for churches. Plus, it can help you use donations correctly, which is crucial for gaining repeat donors.

Account Management and Funding Organization

Most churches categorize their revenue by source when creating their budgets. Whether you outsource these services to an accounting firm or hire someone in-house, make sure your accountant has experience working with churches. Church accounting is a unique beast to tackle, and an accountant who understands its nuances will be able to effectively analyze your church’s financial situation and create specific goals that help you grow. The IRS has strict accounting requirements for nonprofits and churches. To help organizations meet these requirements, the Financial Accounting Standards Board (FASB) developed GAAP principles. You can also integrate Donorbox with leading accounting software like QuickBooks to sync donation data in both systems and utilize it for your fund accounting needs.

Training Volunteers for Bookkeeping Tasks

• Beyond financial repercussions, noncompliance can damage a church’s reputation, leading to diminished donations and support.
• However, many churches find the UCOA too detailed and are better off using other church-specific templates that they can customize to meet their needs.
• When recording fundraising and donation transactions, it is important to capture detailed information.
• Noncompliance with tax obligations can have serious consequences for churches, including the loss of tax-exempt status.
• Deciding whether to hire or outsource a church accountant is an important decision that can impact the financial management of religious institutions.
• These requirements determine how church finances are allocated into specific “funds” within their financial systems.

Smaller churches can get away with hiring a freelance accountant or working with a local company to file required tax forms and develop financial reports. They will also need a separate bookkeeper to keep track of funds throughout the year. You’ll also need an accountant to create financial reports and file taxes. Smaller churches won’t need an accountant on staff, so you can hire a freelance accountant or contact a local business to create these reports quarterly or annually.

What are the best practices for managing and tracking church donations?

There are 3 essential types of software that every church should integrate into its church accounting toolbox. When it comes to accounting, churches and businesses operate in different worlds. To help clarify things, let’s examine some of their basic financial practices and how they differ. This is beneficial fororganizations that rely on volunteers with virtually zero accounting bookkeeping orbookkeeping knowledge.It is similar to a check register.

Popular Software Options

I have built my accounting spreadsheets using the single entrybookkeeping system outlined above. Now…back to rule number 2…Debits Legal E-Billing and credits must be equal for all entries in a double entry bookkeeping system. To really understand the difference between these two bookkeeping systems, you must understand some basic accounting concepts. Outsourcing can be a viable option for churches that lack the expertise or resources to handle accounting in-house. Churches are generally exempt from federal income taxes but must meet certain criteria to maintain this status.

Dedicated Church Tools

The IRS has specific guidelines for religious organizations, including the types of donations that are tax-deductible and the necessary documentation for the same. Nonprofits such as churches even receive a discount on church accounting the software through TechSoup, which is a nonprofit tech marketplace. Some useful QuickBooks features for churches include restricted fund management tools, donation collection and recording tools, the ability to add volunteers and staff members to the software and bank syncing capabilities.