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By Michael Castrilli

Using The Line Graph to Report Church Financial Information

We know that choosing the best visual is not a one-size fit all approach for church financial reports, so when do we choose the line graph?  We’ve already discussed the pie chart, the bar chart, and now it is time to talk about the advantages and cautions of the line graph!

The Line Graph

Line graphs connect individual data points and then connect the points with a line. These graphs are primarily used to display trends in data.

Advantages

  • Line graphs can quickly show data ranges, minimums, gaps, clusters or outliers.
  • Similar to the bar/column chart, the line graph can help readers visualize trends, bumpiness or patterns in data.The graph is useful when data contains evenly spaced values such as months, quarters, or fiscal years.
  • The graph is useful when data contains evenly spaced values such as months, quarters, or fiscal years.

Cautions

  • The line graph is less appealing to the reader than other visuals that can be used (i.e. bar/column charts) to display similar data.
  • Be sure to create a “Key” that distinguishes the various lines in the graph.
  • Ensure that the horizontal and vertical axes scales are right-sized given the range of data that is presented.

Next week, we dive into the Data Table!

Interested in learning more about visuals for church financial reporting? Read our previous  posts:

By Michael Castrilli

Church Visuals – Bars Aren’t Only For Drinking – The Bar Chart

As churches balance the broad range of financial information that parishioners seek, they also struggle with what to report and how to communicate this information. As we continue our discussion on best practices for communicating church finances with impact and ease and choosing the best visuals, let’s turn the infamous bar chart!

The Bar Chart

One of the most common visuals in reports is a bar/column chart. Using bars or other shapes, the visual displays discrete data in separate columns. These charts can be used to show one data set, or compare two or more data sets by lining them up in the same graphic.

Bar Charts Advantages

  • The chart offers readers a simple way to visualize data highs and lows at a glance.
  • The bar chart can help readers visualize trends, bumpiness or patterns in data. Trends occur when information moves in a general direction, or data can look bumpy meaning that the information is erratically up and down. The graph can also show patterns where data moves in a repeating fashion.
  • The use of colors and shapes offer an easy to read and appealing visually.
  • Comparing bars one against the other can quickly show progress or differentiation.

Cautions

  • If using a variety of colors to display more than two categories of data, ensure that the data can be easily recognized. For example, a black and white report may not show the subtle differences between columns.
  • Label the horizontal (X) and vertical (Y) axes.
  • Be careful not to overwhelm readers with so much data that the chart looks messy and then becomes difficult to read.

Next up in the world of visuals, Line Graphs! Interested in reading more? Read last week’s post All Pictures are Not Worth 1,000 Words – The Pie Chart

Church Financial visual that displays a bar chart

Excerpt from my original article in the Villanova University Center for Church Management and Business Ethics Newsletter, “Communicate Church Financial Information with Impact and Ease” (Spring 2017).

By Michael Castrilli

It’s Not Just a Phase

My experience working with ministers is that for many, church budgeting is viewed as a necessary, yet stressful and time-consuming exercise. People resist or even fear the topic because of seemingly complicating processes or past negative experiences. Even with personal finances, many people grow up learning that developing a budget is good practice but a constraining activity designed to prevent or control people from doing all of the things they want to do.

In simple terms, the budget is the tool that connects church priorities to financial resources. The alignment between church mission, vision, pastoral priorities, and budgeting are integrally linked. Effective parish budgeting not only enables you to plan, allocate, and manage resources effectively, it will empower you with information and insights to help inform decision-making.

So, where do you begin? Let me help debunk the myth of budgeting as a constraining activity and provide some simple strategies for developing an effective, efficient, and collaborative budget and financial management practices. Let’s begin with understanding the three main phases of the church budget process.

Tip 11: Formulate, Execute, Control

Below is an excerpt from Parish Finance: Best Practices in Church Management (Mahwah: Paulist Press, 2016).

Phase 1: Church Budget Formulation

Budget formulation is the process used to develop the budget. This is where you will review the variety of income and expense categories and determine how much you expect to receive and project how much you plan to spend. There are a variety of methods we can use to create the budget and in which we can develop the budget. Whether you use top-down, bottom-up, incremental, or flexible budgeting, the framework will help you structure the development.

In the budget formulation phase, the parish will get into the nuts and bolts of budget building. Here a variety of questions will be answered including:

  • What are the assumptions and expectations for the upcoming year?
  • How will resources be allocated for staff, programs, emerging requirements, or assets?
  • What information and methods will be used to ensure that accurate projections/forecasts are developed for income and expenses?

This is the phase of the budget process where we will build the “budget house.” We will review architecture plans, pour a solid foundation, frame the walls, and build a strong roof so that as storms rage, the house remains sturdy and strong.

Phase 2: Church Budget Execution

Once the income and expense parameters have been set, and the budget has been approved, the plan is ready to be implemented. Budget execution is the phase in the budget lifecycle when the checks are written, salaries paid, and income is received. Policies and procedures are established to ensure accountability. Clear roles and responsibilities are developed for who, what, when and how resources will be authorized, distributed, and accounted for. The outcomes of this phase are policies and procedures for collecting and distributing resources. Book: Parish Finance: Best Practices in Church Management

Phase 3: Church Budget Control

Complementing the execution phase, budget control is the part of the budgeting lifecycle that ensures that the efforts that you have put into the other steps of the process are successful. Strategies and techniques can be deployed to keep you on track and headed in the right direction with warnings along the way if you are getting off track. Actual income and spending amounts are compared to budgeted projections to measure variances between the amounts. With this information, parish managers can accurately account for resources or deploy mitigation tactics if spending is getting out of control or if resources need to be reallocated.

All three of these phases build upon one another and create a budget lifecycle that brings flexibility, adaptability, and accountability to financial planning and actions.

Qeustions/Comments? Contact me at mjcastrilli@gmail.com.

By Michael Castrilli

Fraud Alert: 5 Tips to Protect Church Collections From Theft

There is nothing worse than reading about a Church who has lost thousands or even millions of dollars due to theft. Unfortunately, church collections are very susceptible to fraud because the theft involves something that is difficult to track – cash!

It would never happen here, not at our Church! 

Our parishioners would never steal!

This is a Church — people are honest here!

Yes, I do believe that a majority of people are honest, but sin is a problem for a reason. I always like to say; most fraud doesn’t happen overnight. Fraud can occur slowly, even one dollar at a time and next thing you know – thousands, or in the case of some churches, millions are gone.

Fraud can occur as easy as:

Tom, the church usher, finds himself alone in the sacristy ready to put the Sunday collection in the safe. He pauses and thinks, “I work hard for this church as a volunteer. I’ve been here for 20 years; no one will care if I take a $10 bill, this church brings in tons of money.” The following week he takes a few $10s, and as time goes by, the dollars add up.

Jamie, the church administrator, always has the pastor review and sign the deposit slip before she leaves the bank. However, on her way, sometimes Jamie will make a second deposit slip that leaves out $50 or maybe $100 in cash. She forges the pastor’s signature (he won’t mind), and the bank does not notice. The fraud goes unnoticed because Jamie not only makes the deposits; she also reconciles the accounts in the church financial software.

Prevent Fraud – Protect People

Here is the main point – creating safeguards (aka internal controls) for assets is not about trust – internal controls are about protection and accountability.

Question: “Whoa – I’ve been here for years! You don’t trust me?”

Response: “This is not about trusting you, this is FOR YOUR PROTECTION.”

Think about it this way – without strong internal controls, if the money goes missing, how are people protected? If there is no process, there is also no protection. Without shared accountability, individuals are left in the lurch.

5 Tips to Safeguard Church Collections

Tip #1: Send Them Out Two-By-Two – Never allow one person to be alone with collections. If someone is bringing the collection to the office or the safe, have at least two people present.

Tip #2: Rotate Collection Counters – Set up a schedule for different people to count collections for different weeks. If people are in cahoots, and the same people count money in the same weeks, this can lead to fraud.

Tip #3: Create Checks and Balances (Literally) – Financial responsibilities should never rest on one person’s shoulders. The person who makes the bank deposits should not be the person who reconciles the accounts. An individual who writes the checks should not be the only one who signs the checks.

Tip #4: Communicate Proactively – An Information vacuum can cause people to create dirt. Establishing policies without proper communication lead people to suspicion and gossip – “Oh, I heard Laurie might be stealing money.” Be proactive with the answers to what, why, and how new policies are established.

Tip #5: Speak to Fears –  Respond with “This is for your protection,” when confronted with “You don’t trust me?” Changing financial policy is not about a lack of trust but about safeguarding assets and sharing accountability.

Questions? Comments? Contact me at ChurchManagementAcademy@gmail.com.

Read More Church Finance Tips 30/30

By Michael Castrilli

Church Budget Methods: Take it from the Top!

Which budget method(s) do you use when you create your church budget?  How do you estimate revenues and expenses?

There are a variety of methods you can use to create an effective church budget. Three common techniques:

Let’s begin with top-down budgeting.

Top-Down Budgeting

I know it may be intuitive, but a top-down approach to budgeting is when resources are allocated at a high-level and the details are then worked out based on this amount of funding. To use a simple example, think about your salary. Each month, your employer gives you a salary but does not dictate how you spend that money. Unless a pay raise is on the horizon, you know how much money you have available to spend and you work out your budget based on that amount of money.

The same method can be applied to organizations. At certain organizations, a leader will establish how much money will be allocated for a given project and then the budget is created from that level of funding.   On the other hand, maybe you receive a donation from a benefactor and you are going to budget those resources using this method.

Like all budget methods, there are inherent advantages and disadvantages.

The advantage of top-down budgeting is that the method is relatively simple.  It does not necessarily require labor-intensive cost estimating because the overall amount of money that will be budgeted is established.  Using this method, money is then allocated to categories of spending.  One disadvantage to top-down budgeting is that you might be forcing or form-fitting various cost elements to meet your target.

Empowerment and Buy-In Go Together

Top-down budgeting can work really well when you know the amount of money you are willing to allocate or you have a set amount of funding being given by an external source. The key is to involve and empower others who will help you manage the budget so buy-in is established early in this process. As a general rule, if the top-down method is applied to budget formulation, it is important for those who are given responsibility for managing the budget to propose and justify enhancements or reductions for the budget they have been allocated.

A simple method would involve asking the Director to detail how she plans to spend the money AND allow her an opportunity to propose changes to the amount that has been allocated.  You may now be saying, “Ok, but staff will always seek more resources, right?” Again, this is where collaboration is so critical in budget matters. When staff members are empowered and know that they have input into a budget’s creation, it is much less likely that unreasonable requests are proposed.  Budgets that are developed secretly or through closed-door methods serve no one well and actually diminish staff morale. Top-down budgeting works well when those who will manage the budget are involved in the process.

Learn more about the benefits of church budgeting!

Photo Credit: David Holt London Flickr via Compfight cc