Church Budget and Finance Archives - Page 8 of 9

By Michael Castrilli

Break It Down

Do you feel dread when you hear the words “budget” or ‘”budget process?” Based on my discussions with pastors and parish administrators over the years, you are absolutely not alone! No need to fret! Break the process down into four manageable stages and watch as you reap the benefits of creating a collaborative, transparent, and efficient budget.

Stage 1 – Establish Priorities

If the budget is a reflection of priorities, it’s important in the first stage to establish priorities. Stage 1 includes the examination of Church mission, vision, goals, and objectives. This is the stage when pastoral leaders collaborate with staff, parishioners, or other stakeholders and encourage an open dialogue about where the parishes today and what the parish hopes to accomplish in the future. As previously discussed on this blog, the budget is a reflection of your priorities. Therefore, it’s critical to spend some time thinking and praying over what you want to accomplish. Otherwise, the budget may become a shelf document and not a management tool to help you accomplish your goals and objectives.

Timing: 4-5 months prior to the budget being finalized

Stage 2 – Deliver Guidance

In Stage 2, create a roadmap to help you and your team arrive at your destination. This is the stage to discuss targets and expectations. Most income and expense estimates contain uncertainty anyway, so take the worry out of the creation of the budget.

It can be as simple as developing a brief one or two-page document that offers guidance, expectations, and timelines to those helping you create the budget.

This is also the stage to address any assumptions that will impact budget creation. For example, if you have a budget target in mind for a program or initiative, let people know. Don’t keep them guessing as to what you are thinking. People want direct feedback. No one wants to create a budget proposal only to find out that the program was not even considered!

Otherwise, the budget formulation process becomes a “paper exercise” that undermines your leadership and dissatisfies those working with you. Expectation setting may be challenging to deliver in the moment, but being honest with people saves everyone in the end. Transparency around decision-making also helps you gain the trust and respect of your colleagues. Allow adequate time for estimates and justifications to be produced.

Timing: 3-4 months prior to the budget being finalized

Stage 3 – Develop Budget

Stage 3 is when your team estimates parish income and expenses, design program budgets, and create performance goals. Using your parish financial software and other tools at your disposal, you will be able to consolidate information so you can review the various budget elements (income, expenses, and program justifications) from different perspectives. Utilize helpful tools like Microsoft Excel, Google Sheets, or other software programs that serve to consolidate information. When the information is contained in this type of format, you will have a broader perspective and visibility on the various components that will make up your budget.

Timing: 2 months prior to the budget being finalized

Stage 4 – Gain Feedback and Finalize

Share the budget with those you have involved from the earliest phases of the process. After you have a draft budget include stakeholders by allowing them to give you feedback as you prepare your final proposal. This consistent information sharing will continue to build momentum and ultimate buy-in for the creation of a collaborative budget. Buy-in at this stage is defined as ownership and understanding of your budget among stakeholders who are critical for the achievement of your policies and programs. For a parish, this would include staff, parishioners, finance and pastoral councils, and others who help you achieve success.

Timing: 1 month prior to the budget being finalized

Stay Tuned: Tomorrow, we will discuss best practices for implementing these stages.

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 3.

By Michael Castrilli

Make Math Fun!

Now we all know people that like numbers, and we know people that don’t like numbers!

For some, I think the love/hate relationship to numbers goes back to our early education. Remember in school when someone would ask the teacher, “How will I use [insert mathematic topic] in my life?” Most teachers provide a weak response, and my perspective is that people fear numbers because they have not been taught the potential positive impact numbers can offer in work and life.

The first post of the Church Finance 30/30 Series was about the same topic, with a different slant – Budgets are about freedom, not constraint. The same can be said of numbers. Numbers are about freedom, not constraint!

The main point – we need to teach people how to use numbers to help and to inform decisions, not annoy people.

Finance is not all about numbers, but numbers are a critical input and output to finance. So, how do we connect the dots and help people enjoy, and not dread math?

The Wall Street Journal ran a great article, “How One Entrepreneur Conquered Her Math Fear” by Alexandra Samuel.

I think Entrepreneurs can be much like pastors managing a church — they may be a one-person show, with limited support, and a tremendous responsibility for ALL aspects of management — Finance, HR, Advertising, Marketing

Samuel outlines four ideas that I want to use to help you conquer your fear of math, and I will share my journey with numbers along the way.

Action 1: “Learn quantitative thinking with a passion project”

Samuel’s point is that you are not going to get confident with numbers if you’re not interested.

When I was a little boy, I had a teacher tell me, “Mike, you are not very good at math, you should focus on other subjects and be good at those subjects.” WHAT? This is a terrible thing to say to a kid. But, kids listen to their teachers, and I listened well. For a long time, I thought I was “bad” at math.

It wasn’t until my teacher in high school, Mrs. Donna Eichenlaub, helped me make the connection between numbers and something I WAS interested in – money. (As a side note, Mrs. Eichenlaub was so influential in my life that I dedicated my Parish Finance Book to her).

Mrs. Eichenlaub was the first to turn me on to a lifelong passion and career in numbers. I am no statistician, but the idea that numbers can bring insights into all aspects of life was amazing to me.

My passion project became — the stock market. I pretended I had $1,000 to invest, and “invested” that money in a few of my favorite companies – Starbucks, Nike, General Electric.

Each day after school, I would come home and check the stock price in the newspaper (Hey, I am not ancient, but it is true – the internet was not invented yet). Once I saw the share price for the day, I would calculate the gain or loss, the percentage increase or decrease from the time I bought the stock, and then I would predict where I thought the stock price would go. It was terrific.

Ok – I have no idea how my fake portfolio ended up, but to this day I still love the stock market and calculate my stats!

What is your passion project? Remember, learning math does not have to start with church topics.

What are other things that excite you? Maybe you love sports — calculate baseball, basketball, football, hockey stats. Do you like cars — calculate MPG. Do you enjoy politics — calculate the number of pollsters that were correct versus incorrect in the 2020 election. The list is endless.

Action 2: “Find a question you’re desperate to answer with numbers”

Samuel writes, “There’s no better motivation for conquering your math phobia than a question that you are motivated about answering.”

What is your question that numbers could help you answer? Maybe you want to know how much collections have grown or declined over the last five years?

Once you have the numbers, you could think through other non-math factors like neighborhood demographics or personnel changes (like the appointment of a new pastor) that may have impacted collections. Numbers provide a great way to help you think through and find solutions to questions.

Action 3: “Recruit a mentor-humbly”

Push past your comfort zone and find someone to help you navigate the math waters. “Since you don’t want to make a recommendation, much less a decision, based on mistaken calculations or methodology…” get a mentor to help you check your work. Samuel adds that this person should be someone you can approach humbly and honestly.

In the church world, I have found church people get paranoid about others finding out what they don’t know. Don’t let this stop you; if you’re uncomfortable recruiting someone on the inside — like a member of the finance council — find someone on the outside. Maybe it is another pastor, a local CFO, or even a family member that you know is good with numbers. Trust me — there are plenty of people in the world that have made numbers their careers.

Action 4: “Get indignant about your math education”

You can do it! Allow this math journey to help you become a better leader. Instead of walking into a finance council meeting afraid of the financial statements, you can grow confident and comfortable. Be relentless in your pursuit of learning.

**Action 5 – Have fun (I added this one!)**

Fun? Enjoyable? Absolutely. I learned math the same way I learned the piano. Let me explain. I am a big fan of Elton John and loved the song, “Your Song.” So, I went out and bought a music book filled with Elton John’s music. I pounded away at the piano until I was able to play simple chords with my left hand, and the melody with my right hand. It was great, and soon enough, I felt great. Was I good? Not necessarily, but, was I comfortable? Absolutely.

The same applies to math. Get comfortable and learn to enjoy the questions and see what solutions emerge.

There is only one person that can stop us from learning something new – us!

You learned how to ride a bike by riding, to drive a car by driving, to preach by preaching — now learn something new by trying!

It has been a pleasure to journey with you through these 30 days of 30 tips. Please share your thoughts, comments and questions with me at mjcastrilli@gmail.com.

By Michael Castrilli

Church Budget Phases 101

There are three main phases of the church budget process. All budget processes have components of these three phases. Therefore, by understanding them, you’re on the right track to managing your church budget process with ease.

Phase 1: Budget Formulation

The budget formulation stage includes gathering relevant policies, soliciting information from staff and parishioners, documenting assumptions, and projecting revenues and expenses. By developing a resource plan to put priorities into action, collaboration and transparency are critical to this phase of the budget process to ensure openness, buy-in, and accountability by the entire parish community.

Phase 2: Budget Execution

Once the budget is approved, budget execution is the phase when the plan is put into action. The key features of budget execution include establishing and communicating clear policies and procedures for the receipt and disbursement of resources and ensuring financial transparency.

Phase 3: Budget Control

Budget control processes and procedures are established to ensure that the parish meets planned targets for revenue and expenses. If challenges arise or circumstances change for any reason, tools like variance analysis help parish leaders assess the impact of changes and proactively mitigate financial risks.

Now that we have a basic understanding of the budget phases, next week, we will review the different components of what we will call – The Master Budget!

By Michael Castrilli

Change Management for Church – How to Change Things When Change is Hard – Book Review

One of my favorite books on the topic of change management is Switch: How to Change Things When Change is Hard by brothers Chip and Dan Heath (New York: Broadway Books, 2010). The book focuses on the question of why it’s so hard to make lasting changes in our companies, in our communities, and in our lives and how to overcome this challenge.

Psychologists have discovered that our minds are ruled by two different systems one rational and one emotional. The rational mind wants to make a change, but the emotional system enjoys the existing routine. This tension can doom a change effort – but if it is overcome, change can come quickly.

In Switch, the Heaths’ show how we can all confront this challenge of mind and emotion and make meaningful change in our lives at work or home.

Research, Engaging Applications, and Practical Solutions!

The book strikes a good balance between research, engaging applications, and practical solutions. If you are looking for a better understanding of why change is so difficult and how to overcome common roadblocks, this book is a great read. Let me give one example that I found very helpful. In Chapter 1: Three Surprises About Change, the authors explain that self-control is exhaustible.

The narrow sense of the word, as in the willpower needed to fight vice (smokes, cookies, alcohol)…but a broader kind of self-supervision. Think of the way your mind works when you’re giving negative feedback to an employee, or assembling a new bookshelf, or learning a new dance. You are careful and deliberate with your words and movements. It feels like there’s a supervisor on duty. That’s self-control, too.”

“…when people try to change things, they’re usually tinkering with behaviors that have become automatic, and changing those behaviors takes self-control. When people exhaust their self-control, what they’re exhausting are the mental muscles needed to think creatively, to focus, to inhibit their impulses, and to persist in the face of frustration or failure. In other words, they’re exhausting precisely the same muscles needed to make a big change.

Does this point resonate with you? It sure does with me.

Battle Your Rational Mind

As a facilitator, when I am leading a challenging session with participants who are trying to think in new ways about old ways of doing business, by the end of the day I am mentally whipped, and the participants are tired too. It’s not easy to battle your rational mind that knows you need to make a change, and your emotional self that resists learning a whole new way of doing something; it is exhausting. I think owning and recognizing this reality can help make any change process more manageable because, at the end of the day, you have a bit more patience with yourself and understanding for why this can be difficult.

Switch is a great read, and I highly recommend it.

By Michael Castrilli

Allow the Light to Shine Through

Truth and light are central tenets of our faith. Even though we know this in our hearts, as it relates to financial transparency, at times, we forget this in our heads.

I don’t believe that a majority of people are trying to deceive by their lack of financial transparency. In fact, I think many leaders believe that a budget completed alone is a budget completed better — fewer people, fewer questions, less anxiety!

But time and time again, church management researchers conclude the same point — financial transparency yields the best results — people are more likely to give, engage, and trust that their money is being well used.

“If you remain in my word, you will truly be my disciples, and you will know the truth, and the truth will set you free” (John 8:31b-32)h –

As I was thinking about the topic of financial transparency and the freedom that comes from allowing light to shine on the truth, I remembered a story from grad school. My classmates and I were asked to come to the first day of class with a short one-page response to this question, “Is lying ever justified?”

Now I admit, I don’t remember the details of my paper, but I do remember my point – I firmly believed, and still believe, that lying is not justified. Trust me; I am not trying to sound like a saint. And yes, some of my classmates articulated very well that lying for the sake of public safety is positive, but I was not convinced.

My point is that even in public service, where the truth might be hard to hear, and even in the case of public safety people may panic — I believe that the truth gives people the freedom to panic — or the freedom to make a different choice. Instead of panic, what if people rise up and join together in a spirit of community to meet the challenge together? Without the truth, individuals and groups have no choice but to go forward in the dark — without the benefit of information and knowledge to decide the next right action.

Transparency is a commitment to openness in process, methods, and decisions.

The same can be said of financial transparency. Yes, parishioners will ask more questions when finances get discussed in public. But without a transparent, collaborative, and open budget process, it is far more likely that when difficult choices arise, the stakeholders without knowledge of the budget, will be less likely to support difficult trade-offs.

As non-profits, our profit is mission – people deserve to see how their money is being put to use to achieve that mission. Financial freedom does not come from worrying about what was created behind closed doors or justifying to others what was created in their best interest.

Freedom comes from opening financial doors for all to see.

Transparency allows the light to shine through all things — and we know from our faith, and from our lives, that when light shines through – it can be amazing!