Guest Post – Cash Conversion Cycle of Donors

Mr. Jeff Beaumont is a CPA working for a firm that focuses on serving the nonprofit community. His opinions are his own and do not reflect the opinions or positions of his firm in any way. Because he speaks for himself, I won’t identify him or his firm in any more detail. He doesn’t speak for me either.

He has about seven years experience as an auditor working on the issues discussed on this blog.

By Jeff Beaumont, CPA

Would it be helpful to more thoroughly understand incoming church attendees, their giving, and if they feel accepted, welcomed, and a part of the local church family? This post will explore analyzing how long it takes for someone to give as a means to understand the newcomers.

About tracking trends, there are some considerations we need to ponder. When someone first shows up at church, they rarely give the first day. If they do give, they rarely would give their “normal” amount unless they felt part of the church, as if they had some sort of relationship or ownership.

To indicate, either explicitly or implicitly, is to be a sign for the future or point out something. In economics, there are three types of indicators:

  • Leading – what will or could happen (future). An example of this is a sailor’s rhyme: “Red sky at night, sailor’s delight. Red sky at morning, sailor take warning.” This helps with planning as you have an idea of what is likely to occur.
  • Lagging – what has happened (past). Coming up to a traffic light, if you see a yellow light, you know that the green light has already happened (though it will come again!). This is important because it helps confirm that a pattern is occurring or about to occur.
  • Coincident – what is happening approximately at the same time (present). For example, at the traffic light, seeing a green light is an indication of the pedestrian walk signal. This helps to confirm what is currently happening.

Now, back to churches.

For steady attendance, with very little economic changes, we can use coincidental indicators to say that church revenues will remain the same (or increase slowly because of inflation).

However, for a church with increasing attendance, how would this affect offerings? We can look at attendance as a leading indicator, all other things being equal.

For example, with church growth, newcomers typically do not give (a lot) until they feel established and part of the church, which can take months. With this, it is helpful to track increased attendance in one year to help determine if some months later those who become established will give more!

To use a business term, we are monitoring the “cash conversion cycle” of donors. We are analyzing how long, on average, it takes for donors to visit the church, attend regularly, accept it as their “home” or “family,” and then to trust the church and give.

While this may seem distasteful to state it this way, we have used it to help us understand church participation. We also use it to better understand if folks understand tithing to the church. Are they generous? Do they understand the Biblical purposes for giving to the church?

The purposes are not exclusively for budgeting purposes, but to understand the congregation and where their hearts are. If they are young believers and/or are not generous, perhaps the church should consider preaching the basis for generosity (I Timothy 6:17-19). While, financially speaking, staying afloat is important for the church, teaching generosity is crucial.

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