By the end of this lesson you will know the tools you need to track your finances and steer the financial future of your organization. By stewarding your resources of your organization, you can make better decisions based on financial health. To get us started, evaluating your financial health starts with your financial system.

Elements of a Good Financial System

Fund Accounting

An important element of stewardship is making sure that the money you have, receive, and spend is allocated for the proper purpose. To accomplish this you need a solid fund accounting system. Do you have quick access to your finances and ability to run reports?  If you rely solely on one person to not only run reports for you but also to interpret them, I would suggest you spend a little time to get a little more knowledge about that so you’re not always waiting around.

Looking for a better accounting system that can rock your church’s fund accounting? That’s why we built Aplos Accounting.

Tip: Want to learn more about implementing fund accounting for your church? Check out our email course on fund accounting for churches.

Financial Reports

Your financial reports are an essential piece of implementing stewardship across your organization. They can tell you if you are spending money wisely. If you are managing your funds appropriately. If you are budgeting accurately. But in order to use your financial reports to answer these questions, you need to be able to read them. When you see reports, do you know what they are telling you? Here are a couple of the most common reports that your accounting system should be able to produce so you can evaluate what is working and if you are financially healthy.

The Balance Sheet by Fund

• What is your Restricted vs Unrestricted balance – If you have too much money and it’s restricted, it’s going to really limit how much you can spend on the overhead and things you need to get the work done.
• Cash on Hand & Rainy Day Fund – How much cash is in the bank right now? Do you have a rainy day fund? These are questions that you need to be able to address as a nonprofit leader and have a good financial leadership.

Pro Tip: To be able to see the balance of your funds, it is essential to use a true fund accounting software such as Aplos.

Income Statement

• Is your income exceeding your expenses?
• Do you have a plan for big expenses – If you need to replace the copy machine or manage a big building repair, do you have money set aside? Or do you need to raise money to cover the cost? You don’t want to wait till that absolutely has to happen to get that done.

Other Reports

• Budget to Actual – This is a big one you want to set a budget and  track how you are doing against that budget. This is a common report that you’ll see in in fund accounting and other accounting things.
• Monthly Budget & Cash Forecast – Not your annual budget, but your monthly budget and your cash forecast? This is really critical because a lot of churches have seasons of stronger giving, so you need to plan accordingly.

Homework: Ask for a copy of your financial reports, get a cup of coffee, and dig in! If you aren’t sure what you are looking at, call in a favor and ask someone to walk your through it. Investing the time to get up to speed and confident in reading your financials will absolutely pay off in the long run.