Friday, August 29, 2008

ChMS - Should Accounting be integrated with a ChMS?

If there is one question I've been asked more than any other over the years, it's whether or not a church management system should include accounting or not.

In short: No, but it's ok if it does.

Let me explain: Church Management Systems need to include contribution data, because that's the best way to keep donations associated with the proper people without duplication of data. In fact, properly attributing contributions and creating year end reports and giving letters is one of the single most important functions of a church database. At a prior church I wrote a database specifically around this need after the IRS regulations changed in 1994, so I understand this area very well.

However, after those contributions are recorded, the actual entry into the finance system is a simple one. Generally a single journal entry that matches the deposit and assigns the income to the necessary accounts is all that is required. This takes, at most, a few minutes a week. So, while it's ok for a church management system and a finance system to be together in one package, it is completely unnecessary. What is important is that you have a church finance system that works the way you want it to, and supports your organization with accurate financials and reporting, and that you have a church membership database that meets your needs and helps your church minister more effectively to the people God has entrusted to your care.

It is not worth compromising either function for the sake of integration. Buy the best financial package to meet your needs, and buy the best church management solution to meet your needs.

Joel

4 comments:

Brett said...

Yes to all that.

But the real question is: should your coffee maker also have an incorporated grinder?

I have a feeling I know the answer. . .

Kevin said...

Joel,

I agree.

I wrote some thoughts here:

http://kevmccord.typepad.com/weblog/2008/05/integration-bet.html

It should be a goal for the ChMS company to combine financials and data, but it need not be a criteria to purchase one that is combined.

It is not done properly in any system I know, but If integrated properly you have the following additional places that can help:

Budgeting related to your department/ministry/program structure.

Purchasing integrated in the sytem your ministry leaders are using for other tasks.

The ability to compare and contrast core metrics and financial investment at the level of program costs.

The ability to keep your general ledger simple and categorical. If the two systems are separate the only way to understand the cost of ministry is to duplicate the ministry structure to some level in the COA or Detail.

Jay said...

The part about the financial being separate from ChMS is totally off. If it is part of ChMS then you can have the donation post to member accounts and drop right into the accounting side of the system. The argument about it taking only a few minutes a week may work for a very small organization that has 2 - 5 funds. If your an organization that manages 20 - 50 funds this is no small task to do with journal entries.

Additionally most churches do not have the expertise in accounting (IE: no full time CPA) to ensure this is done correctly. Having software that automatically maps the revenue, correct fund and asset account is essential in one system especially for churches that don't have the accounting resources.

When a mistake is made on the contribution side and has to be corrected, then the accounting side can get corrected at the same time. The other method when two systems are used or a non-integrated solution is to make correcting entries on both the accounting and contribution parts of the system. TIME consuming when you can post to several funds at the same time in one contribution batch. Only an integrated solution can do this and if they follow proper fund accounting protocols.

You get absolutely no benefits by having a separate system. In fact what your advocating slows the process down for the user and adds complexity to some thing that is very easy task for a solution provider.

One more note is the total disregard to telling churches that they must obey certain accounting guidelines set forth by FASB 95 and 117. Telling churches to pick a solution that gives them what they want is a valid point but only if it follows the guidelines because if it does not they can lose their tax exempt status. I do hope that any church looking for a financial software (not the donations) takes this into consideration because if you are using Quickbooks this package does not follow those guidelines among many others that sell ChMS.

renewingmind said...

jay,

I appreciate your comment, but I disagree that it is "no small task" with many funds. One journal entry is one journal entry. Sure, fifty accounts & amounts would take more time, but even on paper this is not a monumental task. You don't need a CPA to understand how to debit cash and credit the various income funds necessary to make this entry happen.

A mistake on the donation tracking should be resolved before the batches are ever closed to begin with. That's the reason that you insure that everything balances before you close batches and send the deposit to the bank.

As for "no benefits" i disagree completely. None of the modern cloud based products have accounting integrated. One giant package that covers all of your needs is a very old school approach, one that the market has been moving away from in the last ten years.

I see no correlation whatsoever between FASB 95 or 117 and this discussion. You are presuming (I guess) that I am recommending utilizing accounting systems that do not allow for proper source of funds identification or allow to generate proper financial statements. I'm pretty sure "buy the best accounting system that meets your needs" is exactly what I recommend.

I'm sorry, but we have to disagree on this one...

Joel