Cash in the Attic: Getting Value out of Your Church’s Financial Data
Verne Hargrave
Church Business, October 2005
One of my wife’s favorite television shows is “The Antiques Road Show”. Each week, people bring all kinds of antiques and assorted junk to an exhibit hall where experts tell them what they have and more importantly what it’s worth. I have to admit that the show has a certain appeal to me as well. I particularly enjoy the scenes where people bring in some object that they thought was at best sentimental junk only to find out they possessed an item with immense value.
For instance, one man had an old sampler in what he thought was a very nice frame. He had decided to throw the old sampler away because he needed the frame for another picture. On a whim, he took “the frame” in to the Road Show only to learn that he had an early 19th century sampler worth more than $50,000!
When it comes to financial reporting and analysis many churches resemble this lucky man. They sit on a wealth of financial information never realizing its tremendous value because most churches focus all their energy answering three questions: “How much money did we bring in?” “How much did we spend?” and “How much is left?”
While the answers to these questions are indeed important, they are concerned with where the church has been. But, by digging deeper into the financial and statistical information it already possesses, a church can not only know where it has been, but also spot trends and determine where it is going.
One way of digging deeper is to combine financial data with other information. Most churches, particularly the larger ones, have sophisticated church management software that captures significant non-financial information such as names, addresses, ages, zip codes, and contribution history to name a few. Combining the accounting information with this information greatly enhances a church’s planning abilities.
To illustrate let’s focus on the revenues of a church. The process is begun by adding one question to the ones mentioned above. In addition to asking how much money the church has brought we also need to ask, “Who gave the money?”
“The secret of staying young is to live honestly, eat slowly and lie about your age.”
- Lucille Ball
One way to answer this question is to analyze giving according to age groups. Two methods of doing this are to compute the total dollars given by each age-group and computing a per capita giving average within each age group. These calculations allow the church to identify giving patterns within the church and determine if any of its member groups are lagging behind.
With this information the church would then be able to engage in strategic, focused stewardship education. For instance, if the younger groups in the church are lagging in giving, (which is often the case) the church could provide personal financial management programs aimed at young families rather than conducting a church-wide “Stewardship Emphasis Sunday” (which is the usual approach.)
Don’t put all your eggs in one basket
A second way of determining who gave the money is to break the total revenues down by concentrations by generating a list of the top ten to fifteen contributors. If the percentage giving of this small group is too high, action needs to be taken.
I was told of one church that had two individuals providing seventy percent of the income! This type of situation calls not for the focused steps in the first example but for a much broader approach. The church should use extreme caution in budget planning being careful not to make significant commitments too far into the future keeping in mind that it is only one death, divorce or bad sermon away from financial disaster! Also, this situation would be a clear signal that it is time to implement a broad-based stewardship education program directed to all age groups of the church.
Location, location, location
Tithes can also be analyzed geographically comparing dollars given with zip code information. This technique has proven very useful to churches whose primary mission is outreach to the un-churched and who rely heavily on mass mailings. It has been used effectively in two ways.
First, the presence of a certain zip code in the giving data indicates that the church is ministering effectively to people in that geographic location. To reach out to more people likely to have an affinity to this church mailings can be targeted heavily toward this zip codes. Conversely, the absence of contributions from certain zip codes can be a way of identifying significant mission opportunities. The church could target mailings to areas not being reached and conduct community out-reach events in the targeted zip code’s neighborhoods.
Beware of members bearing gifts (with strings attached!)
Examining designated or restricted gifts helps the church understand who is giving how much and to what cause. It also helps determine the spirit of unity of the congregation. While receiving gifts is usually a good thing, unrestrained designated or restricted giving can cause significant problems. They can be used by disgruntled members to “circumvent the budget”. They can create a situation where the church could be cash rich but unable to meet its budget because too much of the members’ gifts are going to their “special” causes. And, excessive restricted gifts increase the workload of the administrative staff.
Most church management software generates all the information needed to conduct a proper evaluation of this area. But, few churches take the time to seriously examine what is happening in this “non-budget” area. Periodically, each church should closely examine its restricted accounts, reviewing who established the restrictions, how long have they been on the books, are any of the accounts dormant, will the church ever use the funds to accomplish what the donor wanted to do, and most importantly, does this activity conform to the mission church’s mission? The answers to these questions can help the church develop effective charitable giving policies. It also could serve as an alert informing the church that it may need to focus stewardship education not simply on the church as a whole, or even groups within the church, but to specific individuals.
When the cat’s away, the mice will play
Finally, the revenues can be broken down by date. When are your cows fat and when are they lean? Tithing patterns for some dates are predictable. For example, Easter Sunday and the week of December 31 are fat cows with plenty of money rolling in while in the summer the fat cows come to graze. Most churches are aware of these trends and have provided for these business cycles in their budgets.
But others are not quite so obvious. Few churches look closely at their revenues when the senior pastor is not in the pulpit. In a perfect world this should make no difference but the fact is that when the Cat’s away the mice will play. Regardless of planning and pleading, the tithes fall off when the pastor is away, especially for periods of longer duration.
Knowing this can help the church in future planning. For example, the church can create an emergency cash reserve, or review its insurance policies to protect itself in the case of extended illness or unexpected death of the senior pastor. This information would also be useful in determining the true cost of granting a sabbatical to the pastor. A starting point would be to list out the church’s tithes per week for the last several years, spotting weeks when the tithes dipped below average, and conducting and investigation to see if the causes of the dip can be determined.
Getting all the value of your financial statements requires some thought and creativity. Churches can maximize their value by digging a littler deeper into the treasure trove of information they already have.