Petty cash should not be used for payments which could easily be made by cheque or standing order. Petty cash is for paying the milk bill and buying glue and coffee.
There is no great objection to someone simply exchanging currency of one denomination for another, such as changing a £5 note into five £1 coins. Otherwise petty cash should not be used for cashing cheques or lending money.
The treasurer should periodically remove the vouchers and write them in the petty cash book or computer equivalent. The petty cash should also be counted periodically, at least once a month, to see that the balance agrees. It rarely does. This does not necessarily mean that anything is necessarily untoward; provided discrepancies are small and vary between being overstated and understated, there is no cause for concern. The difference is entered into the petty cash book, usually as a ‘sundry’ expenditure or income, so that the petty cash again agrees.
Even a large discrepancy of say £50 does not necessarily mean that anything improper is happening. The minister could have been reimbursing himself for an expense when suddenly called away before completing the voucher. Reasonable enquiries will usually determine if this is the case, allowing the records to be corrected.
If the treasurer does have concern about how petty cash is being used, that concern should be raised with the church council or equivalent. The treasurer should not make any decisions on its operation.
Computer software
For all but the simplest financial arrangements, a computer should be used. Computers themselves (the hardware) can now be bought for less than £1,000, while accounting software can be bought for £100 or less.
The government has promoted the use of computers and since 6 April 2009 it has been illegal to pay over income tax and national insurance from a payroll other than electronically. This means that payroll must be run on a computer, which is now almost essential anyway.
A computer is simply a tool, like a fountain pen. It does not think or make decisions, but obediently follows your instructions and those written into its programs. A computer error is better described as a computer operator error. There is a computing term known as GIGO – garbage in, garbage out. It means that the quality of computer output depends on computer input.
A computer simply automates the procedures that were previously done manually. It even uses the same terms, such as ‘folders’ and ‘documents’, for its electronic equivalents.
If you have no experience of computers, it is worth learning, as so much of everyday life is now computer based. The best way to learn is to:
buy a computer but get someone else to set it up
have someone show you how to use it (don’t try to follow the often incomprehensible instructions)
start with something simple, such as producing a document, and then learn one new trick at a time
practise using the computer, and try to work out answers to problems before asking for help
ask for help if you cannot resolve an issue for yourself.
Don’t be embarrassed to acknowledge that your grandchildren may have a better grasp than you, and may be happy to explain it to you.
There is no objection to a treasurer keeping church records on his own computer, provided the records are kept entirely separate from the treasurer’s personal records. If you need to acquire a computer or accounting software, there is probably a computer specialist in your congregation who can advise. If not, there may be accountants and others who keep financial records who can help.
When acquiring any software, you should consider more than just what it does and how much it costs. You must also consider what support you will get in the future, and whether the software will be kept up to date. Software is updated in two ways: compliance updating, and specification updating. The first, compliance updating, is to reflect changes in law and accounting standards. The second, specification updating, is simply to add more functions – colloquially known as ‘bells and whistles’. You need the former, but probably not the latter. A computer or software should not be regarded as obsolete just because there is a later version. If they still do what you want and comply with current regulations, there is no reason to discard them. For specification updating, it is usually sufficient to review what products are available every five years or so.
Software often comes with many functions that may not always be needed. For this reason it is common for software to be supplied with a ‘wizard’ which allows you to choose which functions you want. Wizards usually have a standard setting which is appropriate for most purposes and should be selected when starting. You can always adjust the scope of the wizard later.
Remember that, when you buy software, you are buying a licence to use that software and must comply with the terms of the licence. This usually means that you may only load and use that software on one computer, other than as a back-up. You must not allow or use unauthorized copies, commonly known as ‘grey software’. This is a form of theft. If you do need several copies of software, the supplier will usually sell you a group licence.
Accounting software
In terms of software, you should be clear at the outset what you want the computer to do. We are assuming that you already have basic software such as Word for producing written text, and Excel for producing spreadsheets.
If you simply want the computer to keep track of bank accounts and cash, Microsoft Money is adequate. This may be provided as part of the Microsoft Windows package when you first acquired the computer. Money allows you to produce reports from which annual accounts can usually be easily prepared, but they do not allow you to prepare the final accounts themselves.
There are plenty of other accounting software packages available, but it is unlikely that they will contain many additional features required by a church treasurer.
One program specifically designed for churches and charities is Finance Co-Ordinator, produced by Data Developments, Wolverhampton Science Park, Stafford Road, Wolverhampton, West Midlands wv10 9ru. Telephone: 01902-824044, e-mail: [email protected], website: www.data-developments.co.uk. This is designed to ensure compliance with charity law and accounting standards, and is specifically designed for fund-based non-commercial organizations. The company has been providing this software since 1985, and so is likely to remain in business, which has not always been the case with such software. It allows for restricted and unrestricted funds, endowments, statement of financial activity (SOFA) reports, and the suchlike. The software also produces management reports.
Payroll
A payroll for a church is not significantly different from a payroll for a commercial business. So there is no need for special payroll software for churches or charities.
There are many inexpensive but versatile payroll software packages on the market from reliable and established suppliers. Many offer additional functions such as personnel records, time and attendance, and human resources management, which are unlikely to be needed by church treasurers.
3. Banking
Introduction
Strictly speaking, a church does not need a bank account at all but could keep all its funds in ready cash. This is not recommended because of the security risk and lack of reliable documentation. However, it can be useful for a church to keep a small amount of ‘petty cash’ available, as explained above.
A church will normally have at least two bank accounts:
a current account for day-to-day expenditure
a deposit account where funds not immediately needed can earn interest.
There are other reasons why it may be convenient to have more than one bank account:
a