It’s that time of year for reviewing and reflecting. And for church accounting, it means reconciling, resolving, and year-end closing. Year-end closing doesn’t have to be a scrambling process. Wrap up the year by squaring away a few accounting tasks so that your books are up to date and ready for the year ahead. It’s important to close a month and a year to secure your financial data and preserve the integrity of them – not only for you but also your board.
Analyzing Church Financial Statements
Begin year-end closing by analyzing your financial statements.
Along with the typical reports you run on a regular basis, run an analysis of revenue and expenses, sometimes known as an income statement, or profit and loss (P&L) statement. View the document so that there are columns that compare the actual to budget with a variance column for both month and year-to-date. The income statement lists the money gained and lost throughout the year. Having a view of both months and the year-to-date periods is helpful to see a discrepancy or trend. Analyze the variances. “Drill down” on actual numbers to see the details of how money was spent.
When you run your balance sheet, it’s important to compare your checking account balance against the bank reconciliation. Getting to the “magic zero” isn’t where to stop. Don’t celebrate early. Make sure the calculated book balances are on the reconciliation and the balance sheet. This comparison should be in sync. If it isn’t, resolve the matter. It could be from posting to the wrong month. Other times, journal entries with two different checking accounts can create a gap – but if you get in sync and keep an eye on it every month, it’s a much easier task to manage.
Next up: Liability accounts – do they look reasonable? Will it clear itself out at the start of the next month? Or is the account growing and not diminishing? Address the issue – see whether it’s pension matching. And double entries can explain some issues.
Then do the same for the restricted/designated account balances. Do those look reasonable?
At the end of the year, churches can take up church offerings that are usually put in restricted accounts, where you’d turn around and remit those to another entity. If there’s still a balance, should you have remitted it to someone? It could be a flower fund set up as a restricted account for Christmas. Maybe your church buys poinsettias and members purchase them in memory or in honor of others. It could be the church fronts the money for the flowers, which would throw the account into the negative until members reimburse.
Restricted accounts do not close at year-end. Those balances carry forward.
Keep an eye on financial statements every month so it doesn’t get overwhelming. Closing a month bumps up the posting month to the next period. Don’t wait till January when you’re really busy trying to meet a deadline.
YEAR-END TASK CHECKLIST
It’s important to analyze financial statements prior to starting the closing process.
- Close all individual modules
- Enter and post all open transactions
- Enter budgets
- Print reports
Join us at 2 p.m. EST on January 12 for an ACS year-end closing workshop. Our experts will answer questions regarding year-end closing, the differences between year-end and month-end closings, the timing of closing associated with tax filings, and what to do when adjustments are needed before closing the books.
Kimberly spent several years in communications and graphic design roles, including at a Florence church that uses ACST solutions. Before her communications roles, she managed the newsroom as a content editor. Kimberly is a cradle Catholic who’s active in church life, serving in volunteer roles and participating in Bible studies.