Church Budget and Finance Archives - Page 3 of 9

By Michael Castrilli

Tips for Communicating Church Finances with Impact and Ease

We covered so much ground in our discussion of communicating church finances with impact and ease! Let’s conclude our discussion with three final tips to make your church financial reports awesome!

Tip 1: Clarity Matters

As you develop your church financial report, ask yourself the question, “Is this clear?” A helpful technique may include seeking the counsel of a colleague or member of the Finance Council. Ask the question, “As you look at this report, what do you think are the key takeaways that I am trying to convey?”
If your reader struggles or offers a lengthy, convoluted message, you have your answer. Ask parishioners to weigh in, allow others to assist you, seek input from staff.

Tip 2: Offer Context

When creating a financial report, a common mistake is to forget to include the overall picture, providing context to what is being reported. For example, if I report that our savings account has $200,000. Is this number good, bad, or indifferent? The answer is, “It depends.” The figure needs context. It might help to include the savings amount from the last three years. Has it been on a slow decline, increase, or up and down over these years? Additional historical data can provide context to the reader.

Tip 3: Practice, Practice, Practice

Remember, writing these reports takes practice. The first time you compile a new type of report and offer it to parishioners, it may not be perfect. Share the report with others, get feedback, and revise. Creating something is better than producing nothing. You are not alone in this process. Every member of the parish has a stake in understanding the finances of their parish.As you lead efforts to create accessible, empowering, and transparent financial reporting, remember that the methods and techniques discussed are not only good management practices, but also speak to the values that we share as a Christian community. The clearer we are in our communication of church finances, the stronger we become as a community.

As you lead efforts to create accessible, empowering, and transparent financial reporting, remember that the methods and techniques discussed are not only good management practices, but also speak to the values that we share as a Christian community. The clearer we are in our communication of church finances, the stronger we become as a community.

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

By Michael Castrilli

Internal Controls to Protect Your Church Against Fraud

Church internal controls are those processes and procedures, standard in the business world, that are used to ensure the proper handling of funds. In my blog post, Fraud Alert: 5 Tips to Protect Church Collections From Theft, I discussed some simple ways churches can protect against fraud.

Church internal controls are a form of checks and balances with church finances. If one person has sole responsibility for all financial tasks, there is no protection of the person (in the case of suspected fraud) or the parish, against claims of fraud. When internal controls (checks and balances) are in place, no one person or office handles all financial matters.

Solid church internal controls builds a culture of trust, collaboration and shared accountability!

Building on this theme to help churches guard against fraud, I wanted to share some tips that Dr. Chuck Zech, my colleague at Villanova University and co-author of our book, Parish Finance, shared in a recent article in US Catholic Magazine: 5 essential practices to get your parish finances in order. It is a resourceful article that summarizes easy-to-implement tips for adopting an open, transparent, and accountable financial process to protect against fraud and build trust.

Read More Church Finance 30/30

By Michael Castrilli

Perfect Is The Enemy of Good

Yesterday, we discussed the four stages of the church budget process. As you implement the four stages, it is important to remember a guiding principle – perfect is the enemy of good! Why wait to create a collaborative and transparent budget process until you believe every aspect is perfect? No need to wait, you can start by just taking the first step.

Establish a Process

The first year of any new process can be challenging, but once established, every part of the organization will be on the same page of what is expected. For example, if your budget begins on July 1, you may want to establish that budget guidance will be distributed each April and the draft budget will be proposed by Memorial Day. Developing a schedule of key budget process dates provides everyone more flexibility so those involved can effectively manage their time. Establish a process in year one with the knowledge that it may not be perfect and that you can refine it by year two.

Reflection Questions

What are the key dates or milestones for the various phases of the budget process?
Have I informed others about what is expected of them by certain dates?

Provide Clear Guidance

Give clear guidance on your expectations for the process, the future, and what success looks like moving forward. If you are going to ask others for information, communicate your objectives and provide visibility in your thinking for the upcoming year.

Reflection Questions:

Am I clear in my direction and thinking surrounding priorities?
Do I need to simplify or improve how individuals submit calculations and estimates?
Do I need to develop additional guidance surrounding narrative descriptions?

Open Communication Lines and Seek Feedback

The budget process should be an opportunity for all voices to be heard. When you open the budget process for the upcoming year and set expectations, hold a town hall meeting where all parishioners are welcome. Listen to the voices of the people around you. Open up the priority setting process so you can gain broader involvement and commitment by the staff and your parishioners. Ask individuals to help brainstorm ideas. If not, then be clear as to the direction you are setting. When others feel involved, they will be more committed.

Reflection Questions:

Who are your stakeholders that need to be brought into this process?
What voices have been missing that will help you create a spirit of openness and transparency?

By Michael Castrilli

Prioritize Your Time

There is no doubt that church managers are busy people. As you develop a budget, focusing on the “right” areas of the budget means prioritizing your time so that you spend the greatest amount of effort on those areas that will provide the most significant benefits. A nice tool to deploy during this phase of the process is to calculate the Budget Category Impact Percentage (BCIP).

If time is money, the BCIP calculation is a simple formula that can assist you to quickly assess the relative size of a specific budget category as compared to the total receipt or spending for the overall Income or Expense category. If you calculate which categories have the greatest impact on the budget, you can spend the majority of your time focusing on those areas.

Let me use a simple example of revenue categories to show you what I mean:

St. Jane’s Church

At the fictional parish of St. Jane’s, the church receives revenues from the following sources:

Next, calculate the BCIP by dividing each Revenue Category by Total Revenue.

Total Collections ($357,000) divided by Total Revenue ($378,300) = BCIP (94%)
Total Holyday Collections ($16,000) divided by Total Revenue ($378,300) = BCIP (4%)

Using a spreadsheet or other mode to make calculations, you can make the calculations for each category quickly by dragging the formula down the column. As you review the information, what are your observations?

Like most churches, Sunday Collections drive the majority of the income for St. Jane’s. You can see that items like Flower Donations and Bulletin Advertising make up only a tiny proportion of the overall revenue.

“So, why does this matter?”

The problem is that many churches spend an inordinate amount of time on reviewing/estimating/analyzing categories that are not driving large portions of the budget. If you have two hours to spend on a budget analysis, focus on the largest drivers of revenues and expenses. By the way, the same process used above for revenues should also be used for expenses. Most likely, after you calculate the BCIP on expenses, you’ll find that salary and benefits make up a large proportion of expenses, and this makes sense because people are your most important resource! Take the analysis to the next step – what is the next expense category that is driving expenses? And the next?

Tip 7: Prioritize Time – Calculate a Budget Category Impact Percentage (BCIP)

Armed with this information, you can begin by reviewing those categories with the largest impact on the budget. I am not arguing that all budget categories are not important. But, with limited time, focus on the income or expense categories with the greatest impact on the budget.

Read More Church Finance 30/30 Tips

Portions of this text come from Michael J. Castrilli and Charles E. Zech, Parish Finance: Best Practices in Church Management (New York: Paulist Press, 2016) Chapter 5.

By Michael Castrilli

The Language of Church Finance

At times, church budgeting can feel like learning a new language – new words, definitions, even new processes. Finance can feel like learning grammar for the first time. But, do not be afraid. I think it can look more intimidating than reality.

I am not saying that one can become a CPA overnight, but there is a great deal of empowerment that comes from learning the nuts and bolts of finance. This also means that depending on your role at your church, you will have to determine what is the right level of education you need to manage your church finances.

One of the main drivers that Dr. Chuck Zech and I wrote our book, Parish Finance: Best Practices in Church Management was to help pastors and parish administrators translate the language of financial management to their environment. I thought it might be helpful for me to put together a quick list of common terms to get people excited! Hopefully, some of these will help you translate this language and not feel overwhelmed, but empowered!

Accounting – Accounting is the systematic means of recording, managing, reporting, and communicating financial actions of an organization (Parish Finance, Chap 9).

Budget – Planning and management tool for executing priorities by projecting, allocating, and managing the money you receive and the money you plan to spend (Parish Finance, Chap 1).

Cash Flow Budget – Financial plan that displays anticipated actual income/receipts and expenditures for a given period. Unlike a linear budget that spreads income and expenses evenly over a period, the cash flow budget presents a realistic month-to-month (or week or day) projection of cash received and cash to be expended (Parish Finance, Chap 5).

Fiscal Year (abbreviated “FY”) – Period of time for which an organization plans the use of funds and reports financial status (Parish Finance, Chap 2).

Financial Management – Planning, organizing, directing and controlling the financial activities of the organization. Focuses on generating financial information that can be used to improve decisions (Parish Finance, Chap 9)

Generally Accepted Accounting Principles (GAAP) – Set of rules that must be followed for the organization’s financial statements to be deemed a fair presentation of the organization’s financial position and results of operations (Parish Finance, Chap 9).

Internal Financial Controls –– a process for assuring achievement of an organization’s objectives in operational effectiveness and efficiency, reliable financial reporting, and compliance with laws, regulations, and policies (Parish Finance, Chap. 8).

Master Budget – Comprehensive financial plan that includes operating and capital budgets and parish accounts and investments (Parish Finance, Chap 2).

Reallocation – The adjustment of resources between or within budget categories, also referred to as fund reprogramming (Parish Finance, Chap 7).

Segmentation of Duties – An approach to internal financial controls based on shared responsibilities related to the collection, deposit, disbursement, and reconciling of parish funds (Parish Finance, Chap 8).

Variance Analysis – Reporting tool to review, analyze, and take action based on the difference between budgeted and actual income and expenditures (Parish Finance, Chap 7).