Software exists to help with almost every aspect of running a business, so it’s no surprise that there are an equal amount of tools available for nonprofits, and thus, faith-based organizations such as churches.
Finding out what motivates church accounting software buyers is very useful information for not just the companies that sell the software, but also companies that are in the market for the solution. Finding our common motivations can help paint things into an easier light for you to make decisions. If you feel you are in the same boat as a different church who is shopping for software, perhaps it’s time you looked at doing so as well.
This guide will offer information on the following topics:
While some churches could be considered as “for profit” (and thus have income), for the sake of this discussion, we’ll go with the more common discussion of churches being classified as a nonprofit entity. At its core, church accounting software is going to provide you with basic accounting to track income and expenses (or since churches typically don’t have any income, “money in” and “money out”).
Given this clarification, you can understand why church accounting software would offer similar functionalities as traditional nonprofit software, such as donor management and fundraising. So why the distinction?
One important difference in how software may (or should) be operated from a church to a standard nonprofit organization is tracking member contributions and attendance. While almost all nonprofit organizations will have some form of membership, churches will regularly set up group meetings such as Sunday School, Bible studies, confirmation classes, or other services that need to be tracked separately from the general fund.
If one were to poll many of the most successful churches in an area, they would likely learn that these churches have taken advantage of all tools and resources at their disposal to get where they are. So what benefits are being utilized within church management software?
While each software solution will be different, these are some of the most commonly found features in a church accounting software solution:
The best kind of church organization has taken advantage of two things: knowledge, and efficiency. Unfortunately, usually the most cost effective way of recording information (via paper spreadsheets) is not the most efficient way of your time. The key is finding the balance but unfortunately having to go back through records in different file cabinets or different offices is slow and cumbersome.
A majority of church income comes from member contributions, so tracking member contributions is a needed function to give you insight into how much each member has given on a weekly, monthly, quarterly, or annual basis. Now only does this allow you to give annual giving statements to members for tax reporting purposes, but it also helps keep your financial reporting as clean as possible.
Having more advanced reporting on who is giving, and when, can help you solicit donations with targeted campaigns. Larger donors can be targeted for capital campaigns, or even encouraged to have the church listed as a beneficiary when they are creating their estate plans. Smaller donors can be worked to contribute more frequently based on numerous small events or projects the church may be working on.
Accounting will work as accounting should. So what features make it exclusive to managing a church organization?
One ability that may go overlooked is the ability to print accounts payable and payroll checks in a self-mailer format. Mailings may seem like a thing of the past with the prevalence of emails and online newsletters, but sometimes an old-fashioned mailer sent to a members home is a great reminder of their past gifts and an easy way to encourage them to keep giving. It is especially beneficial for the technology-averse crowd.
Nonprofits should look for a solution with the intent of saving time. Online training is a great tool for self-paced learning, which is beneficial when you have a part-time staff composed of volunteers.
The question may get asked by someone in the organization: “Why purchase a solution geared toward religious organizations? Can’t a generic (and likely less-expensive) software such found on the shelves of a retail store meet my needs?” Simply put, those solutions are not designed for not-for-profit organizations, let alone churches.
The most simple way to describe it is that nonprofits and churches alike are pursuing a mission rather than profits, which changes the landscape of how you record your accounting. Things are no longer looking to be recorded as profit and loss in a nonprofit setting, since (as the name implies) there is no profit.
Churches and nonprofits stand to lose benefits when they purchase an accounting program that is not designed specifically for them. Instead of having the freedom of movement, they are forced to operate within the restrictions of general accounting principles. Nonprofits, in particular, have to worry about fund accounting, which is the management of resources that have been designated for specific uses. This means that a generic accounting system won’t be able to create a trial balance by the fund or provide the necessary reports or checks/balances to ensure resources are being allocated as needed.
Typically in a nonprofit, a fund will be in the form of a grant that was awarded to them by the government. The nonprofit will need to prove to the government that the money was spent for it’s intended purpose and not on other areas of need. Funds can also come in the form of large donations, where the donor has asked that the money from the donation be put towards something specific.
For example, a church may receive a large donation from one of its members. The donor indicates that 100% of the donation must be used on their pipe organ restoration project that they’ve recently started. However, a sudden rainstorm causes some flooding in the church’s basement, and they need to pay a contractor to fix some water damage. Not only is it unethical to use the donated funds towards this new problem, but it will cause reporting issues when the church is trying to show in their accounting ledger where the money to pay this contractor came from.
As recent as 2018, the primary motivation churches are looking for new software is to replace an older system. A similar report that dove into the buying trends of companies purchasing fund accounting software (which, as mentioned before, is a software primarily used by nonprofits) found that they too had the same primary motivation.
Why are churches coming from older systems? Common sense may tell you that churches will tend to postpone technology purchases compared to other organizations or small businesses due to budget constraints. Many organizations just don’t have money in the budget to upgrade their technology every year, and a complete volunteer-ran ministry may need to develop the attitude of “if it ain’t broke, don’t fix it”. This mindset may lead to churches hanging on to the same software for years, surpassing many recommended updates from developers.
An alternative scenario is a church that has the means (usually the funding) and the motivation to pursue a new software solution. However, they need to ensure that they have the resources available to train their staff. Some churches, especially smaller churches, may have many unpaid staff members who will need to utilize the software, and training them on their own schedule can prove to be time-consuming and costly.
While a solution that was developed specifically for the church is recommended, you may find success using solutions found in these related software categories.