It seems as though everything is moving quickly down the path of confusion and complexity. For example, a “yes” vote doesn’t always mean yes when filling out a ballot for a referendum. If the referendum attempts to overturn a law passed by the legislature, then a yes vote rejects the law’s repeal. Church financial reports should not fall into this category of confusion, yet many do. By their very nature, financial reports are boring to the majority of people. The typical church financial report has pages of numbers and uninteresting facts that don’t provide basic information, like how the church is doing financially.
Before your church invests time to create its next annual financial report, take a step back and evaluate the report through a fresh set of eyes. Determine if the report is clear and provide proper context to the reader, not the report’s creator. Then, use the feedback to create a new report designed to inform and inspire the church.
Be Clear
Creating the perfect financial report is challenging because there’s so much critical information to communicate. Albert Einstein once said, “Everything should be made as simple as possible, but not simpler,” which is perfect advice for creating financial reports. Before stuffing the report with attendance trends, giving units, average weekly giving per person per Sunday, cash flow, debt, FTE to congregation ratios, etc., ask clarifying questions like: What’s the key takeaway you want the report to present? Is that what the reader took away? Is the report too wordy? Is it filled with “insider” language? The report isn’t supposed to dazzle or confuse the reader; it needs to clearly communicate the church’s financial position to a primarily non-financial audience. Being clear doesn’t always mean less. Make sure to distinguish simplification and clarity from omission.
Provide Context
One way to avoid the mistake of omission on the church’s financial report is to provide context to the information. For example, showing the church has an emergency fund of $250,000 presents facts without context. Is the amount sufficient? How does the emergency fund balance compare to the prior year? Did the church use the emergency fund during the reporting period? In this example, regardless of the amount, the church doesn’t require a defensive posture, just context to the facts. Here’s an example:
Emergency Fund (Best practices show churches should have 40-80 expenses.)
Current Year: $250,000 (60 days expenses) Last Year: $225,000
Continuous Improvement
Those familiar with Lean and Agile methodologies understand the concept of Kaizen, an improvement process that lowers costs and improves quality. An oversimplified definition of Kaizen is to change things for the better. What does Kaizen have to do with communicating church finances? A lot. It’s easy to update the same report the church used last year – replace a few numbers, update the charts, and ensure the year is correct and, voila, the year-end report is ready to go. Instead of using the same tired report each year, get feedback from those who read it and ask how it could be better. Look at other churches, non-profits, and businesses to glean best practices.
Simple yet effective reports tell a clear story of your church’s financial position by providing the proper context, a deeper understanding of the numbers reported, and becoming better and more efficient with each passing year. Your church’s mission is too crucial to produce confusing and meaningless reports. Good financial reporting provides transparency and accountability and allows the entire church to join in praying and contributing to fulfilling the church’s mission.
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