TO: All Interested
FROM: Jim Bramer. Retired
RE: Accrued Expense Acctg & the "eFinFax" System Originated in April 2007
Today's "FOR WHAT IT IS WORTH" editorial
It seems that issues regarding "Accrual Basis" and "Cash Basis" accounting methods/systems are continually before finance people at Ministries. Of course, this involves the preferred "Accrual Basis" method of reporting incurred bills that have not yet been paid out of the Bank Account as compared to the "Cash Basis" method whereby you reflect only what has passed through the Bank Accounts, etc.
The thrust in this editorial is accruing aspects of EXPENDITURES ( please note, this is different that Expenses) and not the accrual features of any INCOME. Let me share about this from this "old codger's" perspective:
A> It is essential for applicable Ministry leaders to timely get, in a consistent format, meaningful up-to-date "Financial Facts" or "What" money has been spent and/or "What" is the current financial situation You, of course, must be the very best possible steward, as you are informed of all the applicable/known financial information that pertains to your part of the Ministry --- especially with regard to "General Fund - Actual to Budget" data. Please also Click Here for more information of this nature. Please go HERE for the Mission Statement as to this electronic "Ministry Finance Internet Friendly" accounting system known as the Electronic eFinFax system that is detailed below. A basic ingredient is to be able to answer this question: "Do we really have money to spend in this area of the Ministry?"
B> Fundamental to all of this is knowing "What" has actually been spent "Now" in all applicable facets of the Ministry. Please note that I have said "What" has been spent and not "How" you have spent it, etc. As we all know, this involves disbursing money out of the Bank "Now" using mostly checks or eCHECKS. But, equally important, it needs to also include that which has been spent "Now" via the use of Charge Accounts at Vendors or by using Plastic or Credit/eCheck Cards ---- since you have incurred an Expenditure but it has not yet gone through the Bank.
C> Or you obviously need to use the Accrual Basis (or its "Equivalent" like the electronic eFinFax system as described below) of accounting in order to get everything before you and meet the fundamental objective of knowing ALL of "What" has been spent "Now" information. Or we do not rely on "How" we do our spending as we get the essential financial facts via something like the electronic (eFinFax) system.
D> In my judgment, as discussed Here, reporting expenses via the Accrual Basis is an essential part of day-to-day internal/operational GAAP (Generally Accepted Accounting Principles) as it applies during the year and not just at the year end. In my judgment, internal/operational year GAAP matters should also embrace the peculiarities mentioned Here -- or we need to include "Actual to Budget" reporting of all of the usual known General Fund transactions or the financial facts. This also includes such EXPENDITURES as Debt Retirement, (not Depreciation Expense) , the acquisition of Equipment and Furniture , and also Board SetASides issues.
E> I am fully aware that it is a challenge for Mom-Pop or SmallMins to timely process paid bills (Cash Basis only) so they know who/what belongs to the money on deposit, but they should also account for and make known current unpaid bills at any given time.
"Electronic eFinFax" System (01)
Therefore, I set forth this electronic "HOW" eFinFax system that maximizes the use of Online Tools as well as provides the expense "Accrual Basis Equivalent" of financial facts showing "WHAT" is needed by SmallMins (Small Churches especially) This "HOW" system can work even if you keep your books manually.
By the way, as to the use of Online Tools, I am told that some 60% of US Household members now use mobile Lap top computers with high-speed fast Online connections. Another factor in all of this is that current users of the Internet are divided up in the following age groups: <01> Almost three fourths of all people aged 18 to 49 <02> Nearly two thirds of all people aged 50 to 64 <3> Some one quarter of all people 65 and older.
This is how the electronic eFinFax accounting system works for the applicable SmallMins :
1> This electronic eFinFax accounting system has a weekly expense "Accrual Basis Equivalent" accounting and reporting thrust.
2> You buy everything possible via the Plastic system (preferable via the eCHECK, or the Debit Card) or you make full use of the Plastic Card --- but, of course, you do NOT have a "Debt Problem" since you go Online and weekly pay off the the Credit Card balance. Please note more information about all of this in the HELPFUL LINKS BELOW as you embrace the merits in using Plastic.
3> Your Bank and Plastic transactions either electronically come to you automatically each day, or you manually go Online and get this data. See the ATF (After the Fact) process below per one of the HELPFUL LINKS BELOW. Before the weekend (let's say Friday) the person responsible for this (perhaps functioning from their home) would finalize these transactions plus know the total amount due to the Credit Card Company, etc. If you do not have online access then you pay using the known Credit Card slips. This person would then pay off the current Credit Card balance "Now"-- or you do not wait and do this monthly but you pay off the balance weekly. Of course, such transactions then show up that week for reporting purposes like any other disbursement via the Bank Account.
4> Of course, you pay as many bills as possible via the Online Payment process (especially repetitive bills, etc.)
5> You then weekly only hand-write checks and pay all of the other known operational bills. REMINDER: use the Plastic system or the Online Payment process to pay as many of your bills as possible.
6> On the following Tuesday this person would post the weekly receipts (for instance, a Church would make it's weekly deposit as soon as possible after the Sunday's offering, etc.) to this electronic accounting system and prepare, in essence the expense "Accrual Basis Equivalent" or Cash weekly report. At a SmallMins, this would be distributed to applicable Ministry personnel who would now have a complete "Now" financial facts report. Please note the Spending Control system and report samples found Here per one of the HELPFUL LINKS BELOW. The content of this Website would also be of value.
7> Due to what we have done via this eFinFax System there would be no known unpaid bills for this week, as this expense "Accrual Basis Equivalent" Cash report includes all known "Now" purchase information.
COMMENT: While designed primarily for SmallMins this method can also be incorporated into any size Ministry or Church. Let me know at Jim@bcidot.org if you have any comments or questions about this electronic "eFinFax" system.
HELPFUL LINKS BELOW.(02) -
0041-01 Fun (d) Accounting - not Fun
0004-01 Generally Accepted Accounting Principles - GAAP
1211-01 After the Fact (ATF) Accounting System
0201-15 Weekly Plastic Payment matters
0208-03 eCHECK or Debit Cards
4040-01 Righteous Use of Plastic (eCHECK/Debit cards or Credit Cards)
0002-99 BuxBox system - an alternative to the usual GPFund Budget method
Please note this free WebBOOK after June 2010 on the topic of
"Journey to be Christian Ministry Finance "Internet Friendly"
Please note this "Spending Control" website.
K E E P L O O K I N G U P !!
CLICK HERE for a list of our "For What it is Worth" Editorials or Online documents.
UPTD: June 08, 2012
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