Cash Your Church Doesn't Know it Has

It is both a blessing and a problem.

In this season of rising prices and funding challenges, all organizations work hard to raise money, and are careful not to spend money foolishly.

But, in truth, churches all over America have cash that is “not on the books.”

Where is it? How can this be?

First a story…

The congregation at First Church took an offering of affection as a retirement gift to Pastor Jones for his 30 years of faithful and successful service. But Pastor Jones had a better idea. Because of his love for that body, he quietly never cashed the check, wanting the church to benefit from that cash.

The church thought the money was gone. And Pastor Jones never received the money. So where did it go? Who got the benefit?

The only winner in this tale is the bank. They still hold the cash – and the only way that the church knows of this exists in the Outstanding Payment List (formerly called the Outstanding Check List) inside the monthly bank reconciliation.

“Bank recs,” as they are called, are too often treated as a dull, monthly accounting process. The bookkeeper too often is only concerned that the bank rec balances to the bank, without ever looking at the quality of the information it contains.

By the way, Pastor Jones and First Church are real. This is a true story – only the names have been changed.

But there is more to the story…

The church notified Pastor Jones and his intention was honored, and the church had $5,000 more in the bank balance after the check was voided.

Payments of all sorts can fall into this condition. It could be payments to Missionaries that have left the field. It might also be a former employee that never cashed their paychecks. The Treasurer or some other financial leader should be periodically reviewing the Outstanding Payment List looking for stale payments.

But there is still more…

Your State Attorney General wants to know about this.

All 50 states have “Escheatment” laws which define property that is deemed abandoned and must be surrendered to the state Attorney General for resolution. In most states the law declares that assets which are idle for three years must be surrendered to the state. Depending on the property and state, the period can be as short as one year or five years.

For First Church in our earlier example, the uncashed payment to Pastor Jones should have been sent to the state if it were older than three years and in Massachusetts.

The moral of the story is: look at the Outstanding Payments List - looking for money there that the church does not know that it has. But be cautious, the State Attorney General may want to know about it, as well.

Wondering if you have stale items in your books, contact Wisdom here and let's see how we can partner with you!

Do Your Financial Reports Work for You?

Frustration builds as your finance team sits down for another meeting that leads to more questions instead of answers. Finance team members are looking for a clear picture to make decisions from, but the financial picture shown is muddy and unclear. Team members who are not familiar with accounting feel lost in the reports and walk away with more questions than answers.

A lack of clarity in the church reports can leads to a few different scenarios:

-          Some church finance teams make inferences beyond what the reports show because they need to steer their team to make decisions.

-          Some ignore the content of the reports and focus on all the problems in the presentation of the reports.

-          And some ignore the reports altogether, making decisions purely from a “sense” of where things are at.

Any of this sound familiar?

Reports are the final piece of the monthly bookkeeping and financial life of the church. When done well, they give a snapshot of how the church is doing, where there could be trouble, and where the church is excelling. Solid reports help leadership make decisions confidently with a true and accurate picture of where the church is at and where they are going. 

What do solid reports look like when done well?

To start, reports that give confidence come from books that are kept well.  A church’s books keep track of every deposit into the bank, cash that goes out, income, expense, tracks designated money, and more. Clean books include strong internal controls, which means that there are adequate checks and balances, and oversight into the handling of funds. The chart of accounts and funds have been cleaned up. Without these things in place, it is a shot in the dark whether the reports are showing what is true or something completely contrary to the truth.

Once you have a strong foundation under which you can stand with solid bookkeeping, you can focus on reports.

What makes a good report?

A good report package includes reports that help your leadership see what actually happened.  The financial reports of a church should tell the story of what is happening in the church so that church leadership can make sound decisions. The contents of the report package are unique to each church. Some prefer to see a high-level view, some prefer to see a detailed view of their books, and many prefer to see both. The two most common reports are the Statement of Financial Position, which shows the balance of assets to liabilities and equity, and the Statement of Activities, which shows the income and expenses.

The full story of where a church is at financially is seen when utilizing comparisons.  A few comparisons that may be helpful: comparing what actually happened to the budget (Budget vs. Actual), comparing this year with last year’s numbers at the same time (Profit and Loss, YTD vs. Previous Year), comparing month to month over the year (Profit and Loss by month), and more. Depending on what story the church is trying to tell, the comparison options are extensive.

Getting the reporting package right can be a game changer for your church leadership. The right reports done well can help those who may not understand numbers gain a clearer picture of what is happening at the church. They can give those who need more details the information they’re looking for. Clear and solid reports give confidence and clarity in leadership.

Do you need help and aren’t sure where to start? Wisdom is dedicated to partnering with churches to gain righteous and practical financial solutions, like clear and solid reports.   Wisdom produces reports based on what your leadership needs and the feedback your team gives us.  Clear reports and communication are just some of the ways we partner with you in ministry.

Contact Us to see if partnering with Wisdom is right for your church.

Join Us for Wisdom's Live Church Accounting Basics Webinar on 5/14

Do you struggle each month to understand your monthly reports? Are you curious about why internal controls are so important? Do you wonder if your church is using best practices in your financial processes?

Join Wisdom’s experts on the topic & get your questions answered.

Tuesday, May 14th

4pm EST, 1pm PST

If you cannot join us at the time above, please still register, as we will send the recording out after the webinar.

Live ERTC Webinar

New COVID Financial Relief Available for Churches

In a little-known change, churches have access to a new round of COVID relief funding. Unlike the PPP (Paycheck Protection Program) program, a church qualifies even if it only suffered operational impact stemming from a government order. Proving a negative financial impact is not required to be eligible for Employee Retention Tax Credit (ERTC) relief. In short, churches that cut back programs or services qualify for these refunds. 

Consider whether during COVID your church experienced any of the following? 

• Camps cancelled 

• Youth group cancelled 

• Small groups cancelled 

• After service fellowship cancelled  

• Training and meetings cancelled 

If any of these things happened to your church for a period of time the ERTC may be available to your church. 

So, what is the big deal with the ERTC?   

Refunds available under the ERTC can be as large as $5,000 per qualified employee for 2020 and as large as $21,000 per qualified employee for 2021.  

One of our CPA partners, Wisdom Over Wealth has helped claim over $4 million in ERTC relief. Wisdom is equipped to evaluate the benefit of the ERTC for your church. They will calculate the credits available and prepare the necessary forms for filing with IRS.  

Wisdom is hosting a Webinar on Thursday, November 3rd at 1PM EST to share more information on the ERTC.  Join for more information and to learn how Wisdom can help your church claim these funds.  Register here and we will “see” you there! 

Interested in getting your evaluation started before the webinar?

Click here and let us know!

Employee Retention Tax Credit Update

Kaitlin DeWitt gives a step-by-step video of how to apply for the Employee Retention Tax Credit (ERTC). Please Contact Us if you have any questions!

Take a look at our original post about the ERTC!