Before you generate your financial statements, there is a process you should go through to ensure the accounting reports you give your pastor, treasurer, or governing council is accurate and complete.
Review the steps below before preparing financial statements:
Once all transactions have been recorded you will need to reconcile your bank account. See the steps below for completing this very important step before you begin generating your monthly financial statements.
The bank reconciliation is the process of ensuring that your financial
records and the bank statement are correct and corresponding. It's a
simple process, but can be very tedious.
Review the following bank reconciliation steps:
There may also be deposits recorded in the bank statement but not in your accounting records.
The most common of these is credit card donations.
With online donations the credit card processor may automatically move the money into your checking account. If that was the case, make sure you go to the website donation site and print out a report by donor and amount for the month. Record these donations and restart your bank reconciliation.
Compare each of the checks you wrote to the checks that clear the bank. List any checks not on the bank statement as an outstanding check. If there are checks on the bank statement that are not in the accounting records you will need to investigate these. Where they properly approved and signed by an authorized signer? If so why weren't they recorded?
Once you know the outstanding deposits and checks you are ready to complete the reconciliation and start generating your financial statements.
The net effect should be the balance of the cash account in your accounting records.
If it does not equal the accounting records you will need to go back through everything that was recorded in the general ledger and everything that was recorded in the bank.
A common error is a transposition. For example, a check was written for $78 but recorded in your accounting records as $87. If the amount you are off is divisible by nine, it is likely to be a transposition. You will need to compare each check and deposit in the bank statement to find it.
If outstanding checks from the previous month still have not cleared, your reconciliation will not balance. Look at the previous reconciliation and verify that all checks on the outstanding list have clear this month. If not, add the unclear check to the outstanding check list.
Now you have the bank and accounting records reconciled but you are not quite done...
Look at the reconciling items for outdated or unusual items. For example, it is not unusual that checks we wrote toward the last of the month may have not cleared yet, but if you have checks that you know should have been processed by the bank by now, investigate why it hadn’t cleared. Call the person or company. It may have been misplaced or even lost.
Church Accounting, The How to Guide for Small & Growing Churches by Lisa London and Vickey Boatright