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By Michael Castrilli

The 3-R Approach to Address Financial Challenges

Previously we have discussed how to construct a church financial narrative with impact and ease. However, we all know that writing about money is simple when finances are in great shape. Inevitably, church financial challenges occur and also need to be communicated.

Address Financial Challenges with 3-R

Picture of doors with the inscription "Holy doors of Mercy" showing that openness if required when it comes to addressing financial challenges
The Cathedral Basilica of Saints Peter and Paul., Philadelphia, PA

For example, from a decrease in collections, the parish drew a larger percentage of endowment funds than in previous years. Responding to financial challenges can feel overwhelming, but consider breaking the problem down using the 3-R Approach. The first step is to Reflect what has occurred. What is the actual data telling you about what happened? The second step is to Review reasons or circumstances and consider any changes that are necessary for the future. The third step is to Refine any policies and procedures to mitigate the likelihood that the problem will occur again.

When reporting a challenging situation, keep the narrative simple, straightforward, and offer answers to the relevant “W” questions.

  • What happened?
  • Who is/was involved?
  • When did it take place?
  • Why did it happen?

So, we have constructed the financial narrative, we have addressed any challenges, now what? Let’s choose the most compelling visuals to include in your financial reports. Next week we discuss choosing visuals to communication financial understanding!

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By Michael Castrilli

Bottom-Up Budgeting: Start From The Ground Floor

Which budget method(s) do you use when you create your church budget?  How do you estimate revenues and expenses? Last week we discussed top-down budgeting! This week, let’s take a look at bottom-up budgeting.

Bottom-up Budgeting

Sometimes referred to as zero-based budgeting, the bottom-up method involves building a budget from the lowest income/expense elements and then rolling them up into the total budget request. From zero, each cost element is developed and justified. Therefore when the budget is complete, the program manager has a thorough understanding of the budget under their management.

Advantages/Challenges

The advantage of this method is that each cost element is scrutinized and justified in order to develop the budget. The challenge to this type of method is that it can be time-consuming due to the comprehensive nature of building from zero up.

spiral staircase

Therefore, the leader might consider using this method for one department at a time or taking a bottom-up approach every other year so that the process is not overwhelming for those involved in building the budget.

For example, maybe you start with the Music program, and the following year, review the Religious Education program. When a budget has been developed using the bottom-up approach method, the insight into a program/department is typically very good.

Another advantage of this method is that the detailed analysis provides a level of granularity not necessarily achieved by top-down budgeting. With top-down budgeting, the dollars are broken out from a broader perspective, whereas the bottom-up method creates a more precise estimate of program costs.

Can you figure out what the greatest challenge to implementing a bottom-up budget method? You guessed it; the method can cause anxiety. People may feel like you are scrutinizing them and get defensive. Help staff to understand the answer to questions like, “Why me?” or “Why my program?” Be truthful. If you are asking for staff to build a bottom-up budget because you are concerned about overspending, let them know. We often think that we don’t want to concern staff. But guess what? They become concerned anyway.

When you answer the “why?” question truthfully, watch as build buy-in and rapport. People are happy to help build a great budget when they are clear about expectations and outcomes.

Photo Credit: mripp Flickr via Compfight cc

Portions of this text are excerpted from Parish Finance: Best Practices in Church Management (Mahwah: Paulist Press, 2016), Chapter 4

By Michael Castrilli

Happy New Year 2024!

Thank you for your ongoing support of the Church Management Academy! We look forward to continuing to bring new content to our readers in 2024. If there is something you would like to read more about on these pages in 2024, let us know at ChurchManagementAcademy@gmail.com. May this year be blessed!

By Michael Castrilli

You Can’t Say Thank You Enough

Happy Thanksgiving!

Thank you for being a follower of this blog, for your support, and for all that you do to make the Academy what it is today. Thanksgiving reminds me yet again reflect on how grateful I am for all of you.

In celebration of Thanksgiving, I have been thinking about the art of the thank you note!

I truly believe you can’t say thank you enough. Some people tell me they don’t agree. But I go back to what my mom taught me as a little boy. She would say, “When you offer thanks, it is letting people know that YOU care.”

No duty is more urgent than that of returning thanks. – St. Ambrose

For church donors, a thank you note is an acknowledgment of generosity of someone’s time, treasure, and talent – and in some cases, their love!  People have taken time to give, to offer, and to provide. We should let them know we appreciate what they’ve done. “Oh, no need to thank me.” But it is not about need or reciprocation, it is about an acknowledgement. You care enough to say thank you.

Do everything for the love of God and His glory without looking at the outcome of the undertaking. Work is judged, not by its result, but by its intention.
– Padre Pio of Pietrelcina

Don’t delay

I don’t know about you, but I have procrastinated at times writing thank you notes. Not because I don’t want to write a thank you note, but sometimes, in an effort for the note to be “perfect,” I wait until the perfect time to write. Instead, write the note promptly, get it done, it will be appreciated.

Be heartfelt

Tell a story, let people know how you feel about their gift or donation.

Be authentic

Write what is true for you. I don’t think you can mess up a thank you.

Practice

Like all things, practice makes perfect.

As many of you know, I have a deep love for St. Francis DeSales and his practical wisdom. I love this quote:

You learn to speak by speaking, to study by studying, to run by running, to work by working; and just so you learn to love God and man by loving. Begin as a mere apprentice and the very power of love will lead you on to become a master of the art. – St. Francis De Sales

I’d like to add to the quote, and I think St. Francis would agree wholeheartedly, to give thanks by thanking!

May your Thanksgiving be wonderful!

In gratitude,

Michael Castrilli

Here are some good blog posts about saying thank you to donors:

I would love to hear from you as to how you thank those who support your church,  your work, your ministry! Contact me!

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The stained glass windows at Saint Chapelle Chapel in Paris
Saint Chapelle Chapel, Paris, France

By Michael Castrilli

Church Budgets and Daylight Saving Time

Were you able to sleep in today? Did you arrive at church an hour early?

What does this have to do with church budgets? Good question! The answer is that church budget forecasts are impacted by events like the changing of the clocks for Daylight Saving Time. Most notably in the Fall, have you ever had someone say, “Gosh, I forgot to set my clock back and I woke up an hour later and missed Mass!” As we all know, the time change always occurs on a Sunday.

Have you ever noticed if your collections go down by a certain percentage in the Fall because people are more likely to miss Mass?

The point is that when you are creating revenue projections for the next year, like forecasting collections, note which Sundays have special circumstances surrounding them. For example, does New Years Day fall on a Sunday?  Have you accounted for the cash flow impact when Easter is early (March) or late (April)? Is the Pope visiting? Is it an El Nino or La Nina weather forecast (just kidding)?

Tip 5: When preparing the budget, review the upcoming calendar for events, factors, or circumstances that impact Sundays (i.e. Daylight Saving Time)

The budget is impacted by a wide variety of other circumstances as well. This summer, I wrote a blog post titled, Beachgoers, Snowbirds, and Church Budgets. The post explored the wide variety of factors that may impact a church budget like weather, holidays, holydays, or even accounting for the migration of the northeast snowbirds (like my parents)! These factors call all wreak havoc, or create harmony (with an influx of cash) on church budgets.  Without repeating all of the content on my summer post, click here to read more!

Budget Action Step: Review the past year and understand what has impacted your church budget. You may find that your budget is highly-sensitive to a variety of special circumstances – or maybe not sensitive at all. The bottom line is that if you have never checked, you may never know. This type of analysis can provide you the information and insight you need to prepare the budget in the best way possible!

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