To Reconcile, or Not to Reconcile…

I can remember my mom sitting at the dining room, balancing the family checkbook.  She did it every month.  Most people don’t bother to balance their bank statements anymore and that is not a good thing!

You can easily miss fraud, excessive bank fees, and never fully understand your financial situation if you don’t  balance your accounts.

What about churches? Do they need to reconcile their accounts?  How often?

Just in case you don’t know, reconciliation is the balancing of accounts.  You confirm that every dollar that came in and went out is accurately recorded.

Churches, like any other organization, should reconcile their bookkeeping regularly to ensure accurate financial management and integrity. The frequency of reconciliation depends on the volume of transactions and the size of the church, but here are some general guidelines:

Monthly Reconciliation

Bank Statements: At a minimum, churches should reconcile their bank statements every month. This helps to catch any errors, unauthorized transactions, or discrepancies early.

Donations and Offerings: Reconcile donations and offerings monthly to ensure that all contributions are accurately recorded and properly allocated.

Expense Accounts: Review and reconcile expense accounts monthly to maintain an accurate record of expenditures.

Weekly Reconciliation

Cash Transactions: For churches with a high volume of cash transactions (e.g., weekly offerings), it's prudent to reconcile cash receipts weekly. This reduces the risk of discrepancies and makes it easier to track any issues.

Petty Cash: If the church uses petty cash for small, everyday expenses, reconcile it weekly to maintain control over small disbursements.

Quarterly Reconciliation

Payroll: If the church has staff, reconcile payroll records quarterly. This includes verifying that payroll taxes and other withholdings are correctly calculated and remitted.

Budget vs. Actual: Quarterly reconciliation of budgeted figures against actual income and expenses helps in assessing financial performance and making necessary adjustments.

Annual Reconciliation

Year-End Financial Statements: At the end of the fiscal year, perform a comprehensive reconciliation of all accounts to prepare accurate year-end financial statements. This is also necessary for any external audits or reviews.

Fixed Assets and Depreciation: Annually reconcile fixed assets and depreciation schedules to ensure that the church's asset records are up to date.

Best Practices

Segregation of Duties: Ensure that the reconciliation process involves multiple individuals to prevent fraud and errors. For example, the person reconciling the bank statement should not be the same person who records transactions.

Regular Reviews: Have regular financial reviews by church leadership or a finance committee to provide oversight and accountability.

Documentation: Keep detailed records of all reconciliations, including supporting documents and explanations for any discrepancies.

By adhering to these guidelines, churches can maintain accurate financial records,ensure compliance with regulatory requirements, and provide transparency and accountability to their congregations.