Like any other institution, churches have a lot of things they must learn to manage. On a daily basis, there is an infrastructure to maintain, people, activities, and events to manage, as well as funds and donations to allocate. The management and distribution of funds must be handled with transparency, especially since churches are tax-exempt and aren’t treated as an operating business.
What is an accounting fund?
A church accounting fund refers to the different allocations of the cash available to the church. It’s not much different than what you might do with a private account. Say you have a budget, and part of that budget is allocated to an emergency fund, a dream house fund, and a car fund, each with its own dedicated private account. That’s the same with church accounting funds. The money that goes into that fund shouldn’t be used for any other purpose, but it’s still part of your overall finances.
Any given church can have several accounting funds; such as a fund for missions, a fund for campaigns, charity funds, and so on. Those running a church must keep track of the amount of money available in each fund, and how much will be needed to support a particular activity or task. The different funds have to be managed daily and simultaneously, which isn’t an easy feat.
Three main funds
Most churches work with three basic funds; general, missions, and building. However, these are not the only funds they work with. Juggling several funds at the same time means each one has its own expenses, debts, and financial statements. Coupled with the fact that churches are non-profit and receive tax benefits, this article on https://www.iconcmo.com/blog/church-accounting-software/ explains that using accounting software that adheres to church accounting principles is imperative. Since churches have a unique status and are not viewed as businesses, they are required to focus on accountability even more, including how and to whom funds are allocated. Not all accounting software follows church accounting fund accounting principles, so you will need one that does it because. Alongside this need, it would be nearly impossible to balance all the finances of a church without the use of the right software.
This is the fund that manages most of a church’s income. The bulk of general and administrative tasks are paid for by this fund.
Because one of the main functions of a church is to reach out to people, whether on a local or global level, mission funds are set up to pay for a church’s outreach activities. These funds might be collected through donations or fundraising activities. Some churches may allow for some of their general funds to be transferred into a mission fund.
A church has its own infrastructure, and like with a house or a building, it will eventually come across things that need repair or replacement, such as the plumbing system, paint jobs, landscaping, etc. The church can receive donations specifically for building costs, and they may also opt for relocating some of its general funding toward a building fund.
The general public holds churches to very high standards. A lot is at stake if a church doesn’t run and manage their funds properly in accordance with the rules and regulations. Any church needs to protect itself from financial mishandling to maintain trust and credibility. There are plenty of tools to help in the area of finances and it’s a matter of choosing the right ones.