I’ve been contracted to set up a church’s books. Their system is very outdated. They used an Excel spreadsheet to track their income and expenses, as well as investments. They have a long list of expenses as well as income (or donations). I’m having a hard time trying to figure out where to begin. Should I categorize expenses into general categories?
Churches have limited external reporting requirements, so you have a good bit of discretion on how to structure the data you have. The goal is to provide useful information to decision makers at the church, so you are going to want to get their input before you get too far along.
A sensible first step is to categorize or cluster similar types of revenue and expenses. On the revenue side, you may have categories such as individual donations, fundraising events, and revenue-generating programs. On the expense side, you will likely have clusters such as employee costs, facilities, office, technology, and insurance. If you have expenses that do not fit into those categories, you can add new headings as needed.
In addition to categorizing by type, you can use a program or cost center to identify which part of the organization is generating the revenue or incurring the expense.
Also, it might be a good idea to look into financial software. There are a number of inexpensive (and some free) programs that will allow you to move away from tracking everything via Excel spreadsheets.
For more resources, check out PICPA’s Money & Life Tips, Ask a CPA, or CPA Locator.
Answered by: Michael F. Cade, CPA, CGMA, is a strategy consultant and executive coach for MFCCoach LLC in Morrisville, Pa.