Closing the books at your church is a crucial process. (Perhaps you think of it as a necessary evil). The end goal however, is the accurate and timely publication of both Financial and Non-financial Information so Leadership knows where the church is fiscally and in relation to its goals.
The sooner the books are closed the better. In my opinion, a 3 day close would be the goal, with maybe an additional day at each quarter-end.
/8 Systems to Address /
>:A Solid Chart of Accounts. One that’s:
Simple as possible
Descriptive
Tied to Budgeted/Desired Reporting Needs
>:A Solid Budget
Staff involved in the development by account
Has copy of final budget
Staff understands their budget and how to code expenditures
Really? When staff own and understand the budget and the COA – questions and coding errors go down and understanding of reports go up.
>:Solid Cutoffs
Staff that adheres to predefined deadlines to get invoices, expense reports, check requests to the Finance Dept is absolutely KEY.
>:The Priority of ‘The Close Process’
The close “week” must receive proper priority. Obtain the buy-in and support of your Pastor. Go over what all has to come together in the close with him…see this post.
The Staff must be aware of the priority and understand each person’s part in it.
Limit meetings and requests of those involved in the close.
>:Controls
Use a Close Checklist by day by person
::>Start by documenting your current process and when needed info is available vs. being done
See my post on a 3 and 5 day Closing Checklist
>:Weekly Processes
Review coding of all journal transactions before posting to the General Ledger. For example, posting from Contributions, Payables, Check Writing and Payroll. Accurate input = Accurate output. This way, you’re not spending time reviewing the entire month’s transactions and making corrections during the close.
Have Staff turn in their Credit Card Expense Reports in every week by the weekly AP due date. Consider using Expensify to make it easier.
Track coding errors and report back to the source so they’re not repeated = huge time savings.
>:Other Systems-based
Utilize automatic interfaces from other systems/sub-ledgers…even for outsourced items, such as payroll.
Consider moving the AP cutoff up a day or two (or even to last day of previous week)
::>Day 1 is typically spent closing Contributions, so cutoff AP at noon or end of day 1
Automate Analytical Comparisons to Prior Period [see this post] and to Budget [see this post] in order to investigate/understand Changes and Variances. These can be system generated or set up reports in Excel that are automatically generated from an exported trial balance from the system. (Automate all Financial and Non-financial reporting).
Automate worksheet documentation or calculations to generate the journal entry
::>As much as you can, export data directly to Excel that auto-generates journal entries
If you have a lot of manual entries, batch upload them to eliminate data entry time (and errors)
>:Tasks that can done the week before:
Enter Recurring Journal Entries
::>Prepaid adjustments, depreciation, release deferred revenue/expense, etc
Enter Reversing Journal Entries
::>Some systems do this automatically
Book non-cash donations
Identify Balance Sheet accounts that can be reconciled the last day of the current period
Use estimates for predictable non-critical accounts
::>use budgeted or historical averages, true up before next close
Anticipate accounting issues that require judgment ahead of the close
I believe if you’ll take the time to work thru these areas, it’ll pay huge dividends for you.
Here are some Closing Metrics you may want to track along the way:
# of Correcting/Adjusting Entries
Cutoffs vs Goal
Time to Close Contributions
Time to Close AP
Time to Close Payroll
Day/Time Reports Issued