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TO: Interested Onliners FROM: Jim Bramer, Retired Auditor-CPA
RE: J I Ms J R N L for the months of September/October 2009 FILE: 0910-09/jrnl
This entire edition of JIMs JRNL will "piggy back" on what was shared in the last JIMs JRNL edition about being able to use such resources as FOUND HERE that enable you to answer the following question during these difficult economic times.
“Does your Church (or Ministry) have money to spend for the upcoming week?” (01)
I have been working recently with a good-sized Church on the overall topic and I wanted to share how they went about answering this question. Like many of you their “Operational Income” has declined and they needed to develop a “Red and Green Light” process that enables them to cope with such matters
A little perspective first:
Within their accounting software system they have clearly separated their operations between their single “General Purpose Fund – GPF” and their many “Special Purpose Funds –SPFs”
They use the QuickBooks (QBs) software accounting system for at least the following purposes:
---- Their "LIQ - QBs" Company:
For everyday “Liquid” operations of their GPF and SPF activities
---- Their "LB&E - QBs" Company:
Annual accounting for only their “Land, Building and Equipment –LB&E” and related liabilities.
---- Their "Fiscal Year End QBs" Company:
They re-format the above annual activity/status for "Combo" year end GAAP compliant reporting purposes.
They took the following steps:
It was made very clear that they were talking about the “General Purpose Fund – GPF” only and not the Board pre-approved “Special Purpose Funds –SPFs” matters that flowed via the above "LIQ QBs" Company. Then they thoroughly diagnosed all of the GPF expenditures and decided what costs were “Fixed” and those which were “Discretionary”
The GPF “Fixed” costs included the following:
>> Salaries and Benefits paid twice a month
>> Missionary obligations
>> Interest and Principal payments due on the property etc
>> Essential operational costs such as: facility costs, phone, etc.
Their “Discretionary” costs were very personalized to each Staffer and their ministry.
Below are some of the GPF “Fixed” costs specifics:
I T E M Amount monthly
----------------- --------------- -------------
Mortgage Paymt $ 11,000 1st
Staff Benefits 10,000 10th
Various Costs 7,500 10th
Missions 15.000 10th
Salaries 38,000 15th
Utilities 8,000 15th
Salaries 38,000 EOM (End of the Month)
Last week’s “Balances on Hand” report via "QBs-LIQ" showed the following:
320 · Board Discretionary $ 30,000.00 330 · Donor Restricted $ 5,000.00 359 Special Missions Funds $ 5.000.00 370 · Ministry Events $ 8,000.00 General Purpose Fund - GPF - Net Income $ 2.000.00 Total $ 50,000.00
The “Available via the GPF” amount above of $2,000 is as a result of the accumulative total of GPF Income and Expenditures since the first of the fiscal year.
"Envelopes" Bookkeeping Methods
Next, we walked through the “Envelopes” bookkeeping method. Maybe you will remember that when Grandpa and Grandma handled money (you know before all these contemporary ways that we now handle money) that was primarily green stuff and they divided it up and placed it into applicable individual envelopes (or the like).
They had decided in advance just how they were going to spend their money and had set up an envelope (or the like) for each “Spending Area.” They made disciplined buying decisions based on any remaining money in these envelopes; no money in that envelope then no can buy. It did not matter that there was money in other envelopes, etc.
The Mvelopes software product, or the QBuxBox systems, is based on the same envelope concept except full use is made of contemporary resources such as:
>> You have safe bank accounts and handle less green stuff cash.
>> Your money can electronically go directly to your bank account
>> You can pay your expenses via check or plastic
>> You can make Online payments – some happen automatically.
>> You have access to computerized accounting system tools.
The above resources may be different but much of the concept is still the same: namely, you plan in advance; your money is assigned to respective “Spending Areas”; in a disciplined “up to date” manner you only spend when that “Spending Area” has money, etc.
Smaller Ministries will find value in what Brad has shared with Alex about the eFinFax system along these lines when you Go Here.
QUESTION: So how does all of this apply to this topic before us? ANSWER: We used some of the same principles of assigning money for “Spending Area” purposes per the following process:
Assigned/Account Balance Controls – AABC
Here is what this Church did -----
a> Every Tuesday this Church updates its existing "QB-LIQ" system; that includes going Online and weekly reconciling its Bank and Plastic (Credit Card) accounts.
b> You will remember that the Church started the week with $2,000 in the GPF.
c> Their decision makers want to know what happened within the GPF during this week that would change the above $2,000 so they produce a weekly “Transaction Report,” so they can carefully look over all of the detailed individual GPF receipts and payments during the past week within the GPF. Of course, this includes the weekly offering. But It could have also included settlement of some of the “Fixed Costs” that were mentioned above. Once they have this information they can more completely complete this process.
d> The Church had earlier decided to accrue certain periodic expenditures. One example of theirs is they have a $11.000 Mortgage payment whereby the Bank account is automatically charged for this item on the 1st day of a month. So the $11,000 is booked (accrued) within the GPF during the previous month so that they have a $11,000 liability for this purpose as of the last day of the month. Of course, on the following 1st day of the month the liability is paid off, etc.
e> The GPF upcoming “Fixed Expense” estimates are determined for at least the previously mentioned upcoming Salaries and Benefits; Missions Commitments plus other applicable GPF Operations Costs.
f> Remember these AABC (Assigned/Account Balance Control) assignments (maybe some of you identify better with the term: SetASides) will greatly vary depending on the time of the month and the frequency of the expenditure. For example: the amount of the GPF Income for the 1st Sunday of the month is usually larger than the other weeks, so you will likely want to assign a larger amount , etc.
g> You use these numbers to assign upcoming GPF needs via a memorized QB “Journal Entry” each week. I recommend that you make a hard copy of the “Journal Entry” and attach the applicable supporting documents. The debit total is to a single “QB Expense” account named something like: “AABC Weekly Assignments” and the Credit is to a single “QB Liability” account named “AABC Clearing”.
h> You produce the 13th of the month QB Balance Sheet (I often reference it as a Photo Report) that appears below:
ASSETS Assets Checking/Savings 101 Credit Union Checking $ 9,770.00 102 Credit Union Money Market @ x.xx $ 15,625.00 103 Credit Union@ x.xx % Due xx/xx/xxxx $ 101,859.00 104 ·Credit Union @x.xx % Due xx/xx/xxxx $ 50,145.00 109 · Petty Cash - Office $ 52.00 111 · "NOW" CHECKING ACCT $ 1,500.00 Total Checking/Savings $178,951.00 Accounts Receivable $ 4,214.00 170 · Scrip Store Advance $ 623.00 Fixed Assets -- link here Total Assets $183,688.00 LIABILITIES & EQUITY (or FUND BALANCES) Liabilities 201 Accounts Payable $ 625.00 202 Credit Cards $ 6,328.00 203 Other Liabilities $ 779.00 Total Liabilities $ 7,732.00 Equity or Fund Balances 320 · Board Discretionary $ 39,588.00 330 · Donor Restricted $ 6,367.00 359 Special Missions Funds $ 67,773.00 369 · Short Term Mission Projects $ 2,880.00 370 · Ministry Events $ 12,761.00 Total Special Purpose Funds $ 129,369.00 General Purpose Fund YTD Net Income $ 46,587.00 Total Fund Balances $175,956.00 TOTAL LIABILITIES & EQUITY (Fund Balances) $183,688.00
And the following QB Video (or the year to date " Income Statement" ) as of the 13th of the month shows a healthy QB "Net Income" of $46,787.
401 Unrestricted Donations
500-Salaries and Benefits
620-Church Office Expenses
640 Facility Expenditures
660 Generic Ministry Exp
800-Self Funding GPF Costs
CAUTION: Remember that the objective in all of this AABC (Assigned/Account Balance Controls) effort is to know if the Church has appropriate money to spend for the following week, etc. This is NOT an indication of the overall Church’s GPF operations.
i> You produce the "Journal Entry" mentioned above as you assign the upcoming $38,000 for Salaries and the $8,000 Utilities due in a couple of days which results in the QB “Net Income” of $787.00 ----- or there is a “Green Light” for this week. You communicate this via a weekly Email to the “Church Decision Makers” that says something like: “The "Green Light" amount for this week is $787.00” Or you provide the “The Red Light” amount information in the same way if the QB “Net Income” as produced via this AABC process is a deficit, etc.
j> This, of course, means that Staffers can do GPF Discretionary “Non GPF Fixed” buying only to the extent of $787.00.
k> And finally, since this AABC effort for this week has accomplished its objective of informing you if the GPF has money to spend, then you now go back to "QB-LIQ" system and delete the above “Journal Entry” since it has served its purpose. You continue your accrual process like we described above re the above Mortgage payment, but otherwise you reflect the actual GPF buying in the normal QB manner.
l> Some of you will prefer to have portions of this AABC (Assigned/Account Balance Controls) effort simply flow via an Excel doc process and not involve the "QB-LIQ" system.judiciously provide the weekly AABC (Assigned/Account Balance Controls) “Red or Green Light” information.
COMMENT: For those of you who do not use the QuickBooks (QBs) software, I trust you can see from the above information just how you can use your accounting software to
Please let us know at Jim@bcidot.org or Brad@rpfin.org if any of you have comments or questions.
01 - "Meaningful Declarations" for any of us: (02)
When you say "GOOD MORNING" to someone do you mean to say:
G - od
M - ake us
O - ffers us His
O - bedient and
O - utstanding
R - ready for a
D - evotion
N - ew day with Him and
I - nspire others please, and
N - ever forget
G - od loves you
02 - Click below for potentially Helpful Online Links: (03)
1> The X - Pastor.org 2> The Buzz - via ECCU 3> The Financial Crisis One Year Later per ECCU President Mark Holbrook 4> Recovering from the Brink of Financial Disaster 5> Essential Guide to Church Finances Budgeting, Financial, Treasurer, Audit, Embezzlement
03 - "For What it is Worth" editorials by Jim Bramer (04)
Within context of our above discussion, please go to 0933 for some more thoughts about the overall aspect of record keeping so we know “why” we have money and not depend on its location. Plus the "where” it is pooled should have a short term investment emphasis, etc.
04 - Ministry Finance TRUISMS - or precepts/beliefs/principles. Please go to 0069 for complete TRUISMS list. (05)
FINANCE REPORTING -- The Ministry finance decision makers MUST timely know the entire and complete financial facts, or it functions via the accrual basis form of accounting --- not the cash basis .
05 - Prayerful Thots : Dear Lord .... thank you for someone reminding me of the following: "Faith is like a muscle, and prayer is the exercise that helps it grow." Also this statement impressed me, Lord. "Give not from the top of your purse, but from the bottom of your heart." In thy Precious Name, Oh Lord. Amen.
Probable "Ministry Finance Lingo", or "Frequently Used Vocational Terms" used herein, appear below:
BLVR = Someone who has accepted Jesus Christ as Lord and Savior, CBA = Church Business Administrator, CBAer; CMS = Church Management Software/System; CPA = Certified Public Accountant; GAAP = Generally Accepted Accounting Principles/Practices; GPFund or GPF = General Purpose Fund; MFTeam or MFT= Ministry Finance Team; QBOE = QuickBooks Online Edition; QBooks or QBs = Quickbooks; SPFunds or SPFs = Special Purpose Funds
ABOUT US | OUR PURPOSE | TABLE OF CONTENTS | SEARCH MATTERS | HOW WE HELP SPECIFICS | FUND ACCTG VIA COMPUTERS | GLOSSARY
Click Here for information about earlier JIM's JRNLs - or contact me via Jim@bcidot.org
This document was updated last on: April 20, 2011