Church Management Academy Blog - Knowledge, Tips and Tools

By Michael Castrilli

The Benefits of Church Budgeting

My experience working with ministers is that for many, developing a church budget is 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.

So, why spend the time working on the church budgeting process? Below are six benefits:

Church Budget Benefits

The budget is the plan and tool that will help you…

Connect resources to parish priorities
Create a plan to allocate money coming into the parish and expenses to be paid
Ensure that plans stay on track
Empower effective financial decisions
Bring collaboration, communication, and buy-in
Strategize for the future

By Michael Castrilli

Collaboration Yields Results

There is powerful research that concludes that collaboration in fact yields results. James Surowiecki epic work, Wisdom of the Crowds, was groundbreaking in summarizing research that strongly supported the principle that “No one of us is smarter than all of us.”

One example in the book, that I found particularly useful in helping me understand the benefits achieved through collaboration, comes from the television game show, Who Wants to Be a Millionaire, hosted by Regis Philbin.

During the show, contestants worked through trivia questions in their attempt to win $1,000,000. As a fun twist, if the contestant faced difficulty with answering a question, they had three options available. They were only allowed to use each option once, throughout their time on the show. The options included:

50-50 – The computer eliminates two of the incorrect answers, giving the contestant a fifty-fifty chance at the right response
Phone-a-Friend – Prior to the show, contestants singled out someone they could call for help who they considered one of the smartest people they knew
Poll the Audience – The studio audience would cast votes by computer

From the results* of the show, Surowiecki writes:

“Everything we think we know about intelligence suggests that the smart individual would offer the most help. And, in fact, the ‘experts’ did okay, offering the right answer – under pressure – almost 65% of the time. But they paled in comparison to the audiences. Those random crowds of people with nothing better to do on a weekday afternoon and sit in a TV studio picked the right answer 91% of the time…” (Wisdom of the Crowds, 2004, Page 4)

Tip 4: Collaboration is the glue of insightful leadership, shared-accountability, and results

What does this have to do with church budgeting? The show is just the fun example of the benfits of collaboration. But, collaborative budget processes and operational management does prove time and time again to yield results.

A budget that is developed by one or two people does nothing to build a broader spirit of shared accountability across the church. Many leaders feel they may lose control when they bring others into the budget process. However, management research proves that involvement by a team in financial matters, specifically people responsible for the finances of a particular area, will more likely lead to better results.

Why?

If someone is involved in the budget process, and they feel as if they have had the opportunity to offer feedback and input, they’re more likely to “own” and “buy-in” to what has been created. Without participation in the process, resentment builds and can ultimately lead staff to consciously, or unconsciously, undermine what has been created.

Collaboration paired with open communication is where the budget will help church managers achieve the greatest potential of their organization.

*Note: Surowiecki admits that this experiment would not stand scientific scrutiny. However, other examples in the book, would, in fact, support such an inquiry.

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

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

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

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: