Inward comparisons look at financial data from prior years compared to the current year, or from budget to actual. Tracking historical trends in giving may provide clues to any underlying changes within your organization.
A monthly giving report can provide a useful snapshot of the fluctuations in giving that a church can anticipate in the course of a year. If the financial committee at St. Chaos, a fictional church that shares common traits with many real churches, had been performing this type of inward comparison, it might have realized much sooner that its roof project should have been deferred until the second quarter when giving is historically higher. Understanding trends in your membership’s giving may help you create solutions to level out month-to-month fluctuations. For instance, by adopting electronic funds transfers, your members will have a means for tithing consistently. This is especially helpful in leveling out the communal seasonal dips many churches experience during slower summer months when few people attend services.
Monthly giving reports also provide a more realistic cash forecast, which is critical information for preparing the annual budget. Having this information in a graph format may be useful as well.
This month-to-month comparison gives a picture of the income pattern of a church. Understanding when cash shortages may exist provides opportunity to plan some purchases during different times of the year, or obtain a line of credit to help smooth the “peak and valley” effect. For example, Sunday school curriculum may be purchased in June or July to prepare for the upcoming year.
An example of monthly revenue and expenses together is reflected on the next chart (Example 1), which gives a visual of the gaps and surpluses in funding.
A year-to-year comparison may also be helpful. If your church is growing and has a consistent pattern of increased giving, that is helpful to know. If there is continual decline in giving, wishful budgeting will not create funds. You need to have a realistic view of actual giving. It may also highlight anomalies.
In the graphs below (Example 2), the example included on the left shows an annual increase of approximately seven percent. The example on the right reflects growth in year two but with a significant decline in year three due to the senior pastor’s retirement and then renewed growth of approximately seven percent. The difference between the two scenarios is 20 percent, a significant differential in annual contributions for the five-year period.
Trend analysis can also be performed by line item. You may find it useful to prepare a statement of activities with multiple years displayed side-by-side. Looking at individual contributions and expense lines in this way can be beneficial for budgeting purposes. It will allow you to see the funds that are received and spent over a period of time, ensuring that the spending patterns of the church align with its mission and vision.
Looking inward
Certain inward comparisons may be required by organizations outside of the church as well. Capital campaign consultants, for example, would be interested in attendance and giving data. Lenders may also have reporting requirements related to debt covenants, or they may request some of these types of information before extending credit to your church.
For more help on church finances, check out Increase Giving at Church.
