What Church Bookkeepers Miss #4: Bank Reconciliation
Maintaining the accuracy and integrity of your church’s finances is paramount. Yet, it’s not uncommon for church leaders to overlook a critical aspect of financial management: bank reconciliation.
This practice, while seemingly mundane, holds immense significance in safeguarding the financial health and reputation of every church. Failure to reconcile bank statements can open the door to errors, discrepancies, and even potential fraud, ultimately jeopardizing the trust and stability of the congregation’s finances.
What Is Bank Reconciliation, and Why Does It Matter?
Bank reconciliation is the process of comparing and matching transactions recorded in the church’s financial records with those in their bank statement. This ensures that all financial activities, including income, expenses, transfers, and fees are accurately reflected
Why does this matter? Consider this: Without proper reconciliation, errors or fraudulent activities could linger undetected, potentially snowballing into larger financial issues down the line. Unmatched transactions may signal unauthorized withdrawals, duplicate entries, or recording errors—all of which can lead to inaccurate reporting or even financial loss.
Best Practices for Reconciling Bank Statements
To mitigate these risks and ensure financial integrity, church leaders should adopt several essential practices, including:
Regular Reconciliation
It’s essential to reconcile bank statements promptly and regularly, ideally on a monthly basis. Failure to do so can result in discrepancies lingering undetected for extended periods. The more time that goes by makes it harder to identify the source of errors or potential fraud.
Establish a monthly schedule for reconciliation and assign responsibility to a trusted team. Be sure they have access to all necessary financial documents and records, and have them share their reports on a monthly basis with the church board.
Matching Transactions
Every transaction in the bank statement should match corresponding entries in the church’s accounting records. This includes all income, expenses, transfers, and bank fees.
Ideally churches should utilize accounting software that integrates with their church’s bank accounts for easier reconciliation. Promptly recording transactions helps to ensure accuracy.
Investigation of Discrepancies
Any discrepancies between the bank statement and the church’s records should be investigated promptly. This involves tracing the source of the discrepancy and rectifying it.
Document and investigate any discrepancies between the bank statement and the church’s records. Be sure to communicate with bank representatives if necessary for any questions or to clarify transactions. Lastly, create a procedure your team can follow to rectify inconsistencies or report any suspected fraud to your church leadership.
Segregation of Duties
Assigning reconciliation tasks to multiple individuals creates checks and balances within the financial management process, reducing the likelihood of errors or fraudulent activities going undetected. These tasks include recording transactions, reconciling bank statements, and authorizing payments.
Assign distinct roles and responsibilities to different church personnel involved in financial management. This reduces risks to your church’s financial integrity and ensures compliance with best practices.
Ensure Your Bank Statements Are Reconciled Correctly
Regular reconciliation serves as a vital checkpoint, revealing any discrepancies or anomalies that may have occurred. By implementing these practices, your team can maintain accurate financial data, minimize the risk of fraud or errors, and uphold the trust and integrity of their financial management processes.
Properly handling church finances in-house can quickly become overwhelming. That’s why churches around the country turn to Finch’s team of financial experts. They can help you navigate financial challenges with confidence, ensuring your church’s resources are used effectively for the greater good of their community.
On top of this, they also supply you with monthly reports, financial statements, and regular calls with accountants and analysts to secure your church’s financial integrity.
Corey has 10 years of professional experience in financial planning and analysis. His previous areas of focus involved helping launch the Financial Services department of a large government contractor, where he developed the various reporting and budgeting systems.
Corey also actively manages Shorebird, a Registered Investment Advising firm that focuses on Financial Advising, Planning, and Investment Management for clients. He is also an adjunct finance professor at the University of California, Riverside for their graduate-level programs.
Corey received a B.A. in Business Administration at the California State University, San Bernardino; a Masters in Business Administration and a Masters in Finance from Indiana University’s Kelley School of Business.
Jonathan has more than 7 years of professional experience in corporate taxation and strategy with both public and private companies. His industry experience includes entertainment, church finances, medical device, and technology. Jonathan is also an adjunct professor at the University of California, Riverside (named a Best Business School by Princeton Review and named a Best Undergraduate Business School by Businessweek) and speaks at conferences on topics such as leadership and management.
Jonathan is a graduate of the University of California, Riverside and an MBA candidate at UCLA Anderson School of Management. He is a licensed Certified Public Accountant (CPA) in California.
Jonathan previously worked at PricewaterhouseCoopers, LLP where he specialized in corporate taxation.
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