Pastors, in this post I’d like to answer questions you may have concerning closing the books. Such as, “What does it take to close the books? What does this process look like? Do I need an Accountant?”
A lot of things have to come together to close the books. It all starts at the Operational Level. Things like entering invoices, processing payroll (this is important!), processing contributions, writing checks, and scheduling online payments.
I have divided these into four areas on a chart. Take a look and read on. Download the full PDF [download id=”367″]
The detailed transactions from the four modules are summarized (although I post AP in detail) and fed into the General Ledger. The General Ledger is the hub for all financial transactions and one of the main tools for the Accountant.
Once all the month’s transactions have been posted, a review must take place – I call it “Reading the General Ledger.” Not only are Accountants reading the books for what happened, (comes in handy later during Budget vs. Actual Variance Analysis and Cash Flow/Changes in Balance Sheet Analysis) they look for transaction errors as to fund/department/account classification, and they look for errors of omission as well.
To review, here’s what The Closing Process looks like:
1. Everything is posted to the General Ledger
2. The General Ledger transactions are reviewed/adjusted for errors
3. The Books are converted to an Accrual Basis (by a series of entries)
4. The Balance Sheet Accounts are reconciled/Adjusting entries made
5. Draft Financial Statements reviewed/Adjustments made
6. Financial Reports are Distributed
Pastor, the further down one goes in this process, the higher the skill set needed, (and knowledge of operations and budgets) – particularly so if you desire your church to adhere to GAAP (Generally Accepted Accounting Principles). I believe the church should adhere to GAAP as it’s the essence of 2 Corinthians 8:18-21 – doing what’s right before God AND Man.
Typically, a Finance Secretary stops at #1 and if they’re also doing the reporting, skips to #6. (Which I do not recommend). Sometimes, a Bookkeeper or Staff Accountant picks up at #2. If you don’t have the skill set needed on staff, seek out an Accountant in your church to help on a volunteer basis. BTW, if one person is doing all the above, that’s a serious control issue. [I wrote about that here].
Anyway, I hope this helps clarify what it takes to close the books.
Pastor, if you need help getting the books closed or with reporting and analysis and more (for 2% or less of your budget), see this page for more info.
