Having a good fund accounting<\/em> package (such as ExpensePlus<\/a>) will provide you with a streamlined way to manage your church or charity finances, and it will also provide you with all of the financial reports you need.<\/p>\n\n\n\n Before looking at key financial reports, let’s first get to grips with the concept of \u2018funds’. <\/p>\n\n\n\n A fund is a pot of money, or assets, set aside for a specific purpose. When your charity receives income, you need to allocate this to a fund based on the purpose for which it was given. Similarly, you need to allocate expenditure to a fund. This makes it possible to track how much money given for a specific purpose remains in a fund at any point in time. <\/p>\n\n\n\n Typically, a church or charity will have several different funds which may include the following:<\/p>\n\n\n\n A common misconception is that a fund is a bank account – it\u2019s not! Find out more about fund accounting right here<\/a>.<\/p>\n\n\n\n This key report provides a breakdown of income and expenditure. It\u2019s typically the report you will feel most comfortable with. You can usually view it by fund, broken down by category and by month.<\/p>\n\n\n\n Receipts and Payments vs Accruals accounting:<\/strong> If you create accounts on a receipts and payments basis, income and expenditure will appear within this report based on when the money comes in or goes out of your bank account. For example, if you receive Gift Aid income in April, this will appear as April income (even if the Gift Aid claim relates to February). If you create accounts on an accruals basis, income and expenditure will appear based on the date it relates to. For example, Gift Aid for February will appear in February, even if doesn\u2019t arrive into your bank account until April. For more information about accounting basis, click here<\/a>.<\/p>\n\n\n\n At the bottom of the income and expenditure report there is a summary of income, expenditure, and surplus for each month. Unlike companies, charities are \u2018not for profit\u2019, which is why this is \u2018surplus\u2019 rather than \u2018profit\u2019. <\/p>\n\n\n\n In addition to viewing income and expenditure by fund, your fund accounting software should provide other income and expenditure reports that enable you to view income and expenditure across all funds<\/em>.<\/p>\n\n\n\n You may also be able to create reports for events that you run (without<\/em> the need to set up a separate fund for each project\/event). For example, in ExpensePlus<\/a>, the projects <\/a>report allows you to compare income and expenditure for specific events. <\/p>\n\n\n\n How you structure categories (also known as \u2018nominal codes\u2019) determines the breakdown of income and expenditure in the income and expenditure report.<\/p>\n\n\n\n It is up to your church or charity to decide how to structure your categories. Many organisations have less than ideal category structures, typically because:<\/p>\n\n\n\n When deciding your category structure for your organisation, a top tip is to keep it simple! If you are not sure where to start, then we suggest you have:<\/p>\n\n\n\n Having too many categories can result in the income and expenditure report becoming too long and complicated. Resulting in key people not reading or understanding it.<\/p>\n\n\n\n If you are not sure where to start with your category structure, here are some example categories below for a medium sized church:<\/p>\n\n\n\n Different categories in each fund: <\/strong>most organisations use the same set of categories for each of their funds. But you don\u2019t have to do this. For restricted funds, you may prefer to have a subset of the categories that you have for your general fund. You may wish to have different categories altogether if the general fund categories aren\u2019t suitable.<\/p>\n\n\n\n Once you have your income and expenditure categories, you can create a budget for each category.<\/p>\n\n\n\n Creating a budget has the following advantages:<\/p>\n\n\n\n Learn more about creating a budget for your organisation in this Practical Guide for Churches and Charities<\/a>.<\/p>\n\n\n\n Your budget per category, the % variance between budget and actual income\/expenditure, and the projected total will appear in your income and expenditure report. You can find out more about entering your budgets in ExpensePlus here<\/a>.<\/p>\n\n\n\n Here is a checklist of helpful things to look out for when reviewing this report:<\/p>\n\n\n\n Once you are happy that the report is correct, here are some of the key metrics to review:<\/p>\n\n\n\n Where there is significant deviation it\u2019s worth trying to understand the detail behind what is happening and consider what changes you need to make.<\/p>\n\n\n\n The fund movement summary is another really helpful financial report. It shows opening and closing fund balances for each fund. It also summarises the net movement of funds within the financial year. This report is a great way to view fund balances for all funds in one place!<\/p>\n\n\n\n Cash and fund balances:<\/strong> If you create accounts on an accruals basis<\/a>, then your fund balances are maybe made up of more than just cash. When creating accounts on an accruals basis, fund balances include assets less <\/em>the liabilities for the fund – see the Balance Sheet<\/a> section below for more information.<\/p>\n\n\n\n Here is a checklist of helpful things to look out for when reviewing this report:<\/p>\n\n\n\n Use of restricted funds first:<\/strong> where you can pay expenditure from a restricted fund (within the restrictions of what the restricted money was given for<\/em>) then you should<\/em> look to do so, rather than paying expenditure from an unrestricted fund.<\/p>\n\n\n\n If you identify any issues when reviewing the fund movement summary report (e.g. expenditure being higher than expected, or income being lower than anticipated), try to understand the detail behind what is happening and consider what changes you need to make.<\/p>\n\n\n\n If you create accounts on an accruals basis<\/a>, then the third really important report when managing church or charity accounts is the balance sheet<\/a>. <\/p>\n\n\n\n The balance sheet report<\/a> shows a breakdown of all the assets and liabilities of the church or charity either by fund, or for all funds. <\/p>\n\n\n\n You typically view this report at a given point in time. But your accounting software should also enable you to view this report either \u2018by month\u2019 and by \u2018fund type\u2019.<\/p>\n\n\n\n Your organisation’s assets are more than just the cash in the bank. Assets include:<\/p>\n\n\n\n Your organisation also may have liabilities. Liabilities include:<\/p>\n\n\n\n For receipts and payments accounting: <\/strong>if you create accounts on a receipts and payments basis, the equivalent to the balance sheet report is the \u2018statement of assets and liabilities\u2019. The way you account for assets and liabilities on a receipts and payments accounting basis is very different.<\/p>\n\n\n\n It\u2019s important to check all of the balances on this report. In particular, you should check that your Accounts Receivable and Accounts Payable balances correctly reflect the money you are owed and owe.<\/p>\n\n\n\n Any Prepayments and Deferred Income balances correctly reflect transactions that relate to a future period.<\/p>\n\n\n\n Auto-accruals: <\/strong>if you create accounts on an accruals basis, then if your fund accounting software has an auto-accruals feature this will save you time, ensure your accounts are accurate, remove the need for manual accruals, and help avoid errors.<\/p>\n\n\n\n As well as checking your balance sheet balances for all funds, it\u2019s also worth checking the balance sheet for each fund separately. This is to avoid the risk that a fund balance is showing as positive (because the total net assets less the liabilities for that fund is positive), but that, for example, the cash balance of the restricted fund is negative.<\/p>\n\n\n\n If you identify any issues when reviewing the balance sheet report (e.g. an accounts receivable balance being higher than anticipated, or your cash balance reducing month on month), try to understand the detail behind what is happening, and consider what changes you need to make.<\/p>\n\n\n\n Whilst most organisations do produce financial reports, a common problem is that these are typically PDF or paper-based. This means it\u2019s not possible for others on the team to access up-to-date reports, or to view a breakdown of summary totals within reports.<\/p>\n\n\n\n Not having up-to-date information that is easily available makes it tricky for budget holders to manage their budgets and keep track of the money spent.<\/p>\n\n\n\n A lot of time typically goes into producing financial reports. However, often financial reports are largely historical records of what has happened. Financial reports should instead proactively help inform the team and enable better financial decisions.<\/p>\n\n\n\n If having accurate up-to-date reports that your team can view would be helpful for your church or charity, then you may wish to look at fund accounting packages that can provide you with reports that are cloud-based and easy to access, such as ExpensePlus<\/a>!<\/p>\n\n\n\n This video shows an overview of the Finance Reports Module in ExpensePlus.<\/p>\n\n\n\nFunds and financial report<\/h2>\n\n\n\n
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Income and Expenditure Report<\/h2>\n\n\n\n
Overview of this financial report<\/h3>\n\n\n\n
Income and Expenditure Categories<\/h3>\n\n\n\n
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Deciding your Category Structure<\/h3>\n\n\n\n
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![\"Fund](\"https:\/\/expenseplus.co.uk\/blog\/wp-content\/uploads\/2024\/06\/image-2.png\")
Budgeting<\/h3>\n\n\n\n
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What to look for when reviewing the Income & Expenditure Report<\/h3>\n\n\n\n
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Fund Movement Summary<\/h2>\n\n\n\n
Overview of this financial report<\/h3>\n\n\n\n
What to look for when reviewing the Fund Movement Summary Report<\/h3>\n\n\n\n
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Balance Sheet Report<\/h2>\n\n\n\n
Overview of this financial report<\/h3>\n\n\n\n
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What to look for when reviewing the Balance Sheet Report<\/h3>\n\n\n\n
Accessing Financial Reports<\/h2>\n\n\n\n
![\"Income](\"https:\/\/lh7-eu.googleusercontent.com\/docsz\/AD_4nXfNSY3bna2AsgfLe_8zYaS25-8tUQdRnoY1mD9ptVVZP1u57OvM0PbU8RcXSqPu9T4myxdWBJwIFyb0sUL2CTh5_k9j7ldQiR8ZeW8k8-bVxgZMizm-JLQmbZaSqyt8ok04MT1M5eunpyOZiT-66JbbTgHuKK7nHz6pE2gQvcAE60hjfQaDeGA?key=O9gdhfvUmpR9Z20rKOaong\")
![\"Summary](\"https:\/\/lh7-eu.googleusercontent.com\/docsz\/AD_4nXcjPAqAEXaYSlkDrtbP91AxMYJ-q8v9DH1dgUFNyKtKfZIysneyEkuWMjcsRCLL2x9_Okwdg0Qn4K3ZZ5OnYuBDIgl1HwY_1zi85RKoGrux9RtDy0mFUMugGyx2Lmj-kmexgwYawzdJ_iPWQxtw5hAeCjJN1pTYvV3uLN7FW4h999PcTB5XWhA?key=O9gdhfvUmpR9Z20rKOaong\")
![\"Fund](\"https:\/\/lh7-eu.googleusercontent.com\/docsz\/AD_4nXcyr2sCaK0DKcELZEDUS5grSgKioIOMxqf5Thg2vNymYGVmdnMM5moCKuxy0tAIyFcQ61tB3vzMllT99e1SJR_5EriIOtMaGQIBLL9EXAsAol_nRYJT3tGHkwostFbgil8Us9QDsFUThPMGI-HTVw1z_lp60OwLb67WOvL45rWtM_fk2yJi_Nw?key=O9gdhfvUmpR9Z20rKOaong\")
![\"Balance](\"https:\/\/lh7-eu.googleusercontent.com\/docsz\/AD_4nXd7bSf-atl__VTLYiYrfWDMTP4Sw_G5jUQ6v5Uooc8AyV0A83LAytJc8bedCsZbz1_QZMsSh5tNSofYxjJSMLqctMXwL6epoTwIr7MuZTVn5U8z5t1c5Ahu-EIf0Fc-5YIVQ2KZjrQmiCJRiy69wtYQeE3ktQ4Drdd0QuIbWk3c6KBw1mIE0wo?key=O9gdhfvUmpR9Z20rKOaong\")