Why get a church accounting software when any traditional accounting systems will do? Definitely, somebody will ask this question when a church accounting officer or any church official proposes a change in the accounting system of the church.

The reason as to why it is better for a church or religious organization to have a different accounting system and the accounting software customized to fit its needs lies in its status of being a non-profit organization.

By definition, a non-profit organization is a group whose purpose is to provide goods or services wherein profit is not the primary goal. It is possible for revenue to develop from any of the group’s activities but no individual belonging to the organization can share in the profit or loss that will incur. Assets of a non-profit organization are usually provided by sources with no expectations of payment. Religious groups and their satellite organizations (church-owned shelters, stores, schools, cemeteries, adoption centers, clinics, etc.) are categorized under the charitable organizations type of non-profit. The biggest advantage enjoyed by churches as non-profit organizations is exemption from taxes whether at the local, state, or federal level.

Anyone who gives a donation to the church can use this as a deductible on income tax. However, most donations of a substantial amount that is given to the church come with specific instructions as to their allocation. For example, a donation was made for funding missionary work, building a new church, adding to the scholarship fund, running the soup kitchen, or for a specific church activity or project. Due to this, churches utilize fund accounting practices.

There are two types of church funds in the accounting system: restricted and unrestricted funds. Restricted funds refer to the donations or contributions that are intended for certain allocations such as those mentioned above. In contrast, unrestricted funds are spent for the overall operational and administrative costs of a church. The sources of unrestricted funds include regular tithes, offerings, and contributions. The restricted funds must be clearly distinguished from the unrestricted funds in the financial records of a church. The funds under each of these categories should be differentiated from one another as well.

Opening an individual bank account for every fund, though not compulsory, is a convenient way to manage church finances. Over time, it can be burdensome to monitor all the bank accounts every time donations and projects are added to the financial records of the church. That explains why a church accounting software is necessary for making church fund management easier and more efficient.

Basically, church accounting software makes fund accounting simple and easy to implement. This specialized software is designed with features flexible to the special needs of this kind of accounting system. Using the software, different funds can be assigned their own account numbers. The software can be programmed such that under each of these account numbers, separate cash flow entries can be maintained. Additionally, the corresponding reports for each fund can be prepared and generated easily with just a click of a button. This means that at any given time, summaries of a selected or even all of the funds’ records can be extracted and printed out.

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