How to Create a Church Budget
Many people within the church may not want to feel like the church is a business. Yet, having a church budget is integral. It doesn’t matter if your church is big or small – the money aspect matters. Your ministry must rely on a proper budget so that life’s little emergencies do not deplete the church’s resources.
Here is a starter guide on creating a church budget that you can rely on and know where all of the church’s finances are at.
Why is a Church Budget Important?
Let’s face it, knowing your church’s financial situation ensures that you have plans in place to increase donations, have enough money to cover expenses and emergencies and oversee the entire health of the church.
But, it is more important than just the business side of things. Your congregation entrusts their donations are being used properly. They have to know that the money is helping others, growing the church, and in good hands.
And while it may seem intimidation, a church budget doesn’t have to be difficult or confusing.
What Does a Church Budget Do?
Just like a household budget, a church budget gives you important information on your money’s health. Here is a breakdown on some of the more integral information a church budget provides.
Money Coming In
Sure, you need to know how much money is coming into the church but it is more important than just in those simple terms. For example, some months are going to be more fruitful while others are lean months. Without knowing about both, you cannot have a full grasp on the health of your church’s finances.
According to Forbes:
Analyze financial results from up to five years ago as a starting point. What are some costs that are fixed and inevitable? Those can be entered first. Then you can look at accounts or line items that have fluctuated more drastically over the years. What caused this fluctuation? Were there one-time expenses? Can these fluctuations be controlled? Using past information and adjusting for predicted variances helps provide a more concrete basis for establishing budget numbers.
Analyzes Money Going Out
This sounds simplistic for a reason – it is. It is really that simple that you have to know what money is coming in and what is going out.
A budget also ensures that you know when there are discrepancies. For example, if you do not have a budget where you can see the ins and outs of the church’s money, how do you know if someone is stealing or when it is the best time to think about expanding?
Provides a Picture of What is Important
One of the very reasons to have a church budget in the first place is a factor in what a budget does for you. For instance, without knowledge of the financial health of the church, sometimes smaller yet important missions become lost. This is because not having a budget doesn’t allow you to prioritize.
Let’s say that a church wants to improve the parking lot. You have to know what funds can be allocated. If that same church constantly spends money on the worship service – better sound or equipment – then the smaller missions get left behind, including that parking lot. Sometimes it is very important missions that get left behind simply because they are smaller ones and are overlooked. Then when it is time to finance these missions, the leftover spending has been depleted and the missions are pushed aside until later. In some cases, later never comes because the church doesn’t have a good grasp on their monies.
A Church Budget Gives You Knowledge
There are key areas where the knowledge you have about church finances gives you the freedom to do a few things that weren’t possible before. For example:
- A church budget gives you control over how the money is being spent. If you cannot see that too much is allocated to entertainment instead of infrastructure, how can you ensure that the infrastructure of your church is sound?
- You can show parishioners exactly where their donations are going with a church budget.
- In-house fighting over resource allocation is reduced with a thorough budget.
- A church budget reflects the missions of the church and keeps priorities in check.
How to Create a Church Budget
Creating a church budget is easier than you think and is a priceless tool that reflects the church’s finances or lack thereof. Once you are ready to Get started, you’ll want to start with incoming money first
Look at the church’s income for the last few years, if you have that information. This gives you insight into where the money is coming from. It can be from donations, trust funds, offerings, investments, facility rentals, and more.
The Next Step: Auditing
Once you have your income and have looked it over, the next step is to look at the church’s income. Are there income means that are reoccurring? Are there monies coming in that are due to end?
For example, let’s say that your church hosts certain events throughout the summer where there is an income. Or perhaps you rent the facilities out for a certain time but that is coming to an end. Sometimes these fluid income sources end and leave the church suffering when it is unexpected. It’s just like if you have a job and depend on your income. If you lose your job then that income dries up as well. In order for it not to affect you adversely is to know when income is ending and adjust the budget accordingly. This is one of the benefits of having a budget in the first place.
Other fluid incomes to be on the lookout for are things like yearly fundraisers, Even seasonal income should be noted as possibly ending so that the funds can be adjusted if needed.
Project Your Income
Now it is time to project your income for the year. This includes projected income from the sources you have, as well as making sure you have audited your sources and looked at trends from the past few years if possible. If that information is not available, this is another reason you need a church budget. You should always be able to refer to past expenditures and more.
Let’s hope that once you audited the past few years of income that you see a trend in increased revenue, that this continues to happen. However, it is important to always be proactive. This means planning for more increases. In fact, you can take the increase that is trending and expand on that. Let’s say you’re trending at a 25 percent increase each year. For the net year and beyond, you want to set a goal for a 30 percent increase. It works well to set the goals higher than they need to be. Be sure to have your church aware of the goal and encourage them to rally behind it.
Now if the trends our on the downswing. never budget for that in mind. Instead, budget for increases and try to help implement these increases. No matter what, never create a budget that includes the decrease. Be aware of it and move forward.
It is difficult to manage a budget if you do not have full transparency on what your expenses are. This is important because sometimes expenses may include something that is unnecessary that you can cut out of the budget.
Tale a look at the previous year’s expenses and go from there. Expenses include a myriad of things including staff, maintenance, utilities, a website, debt, and missions.
Keep in mind that a big church and a small church will differ a fair bit. According to Christianity Today:
While large churches spend their time balancing percentages, designing requisition sheets, and tracking an increase or decrease of giving as one measurement of the church’s health, small churches deal with an entirely different set of issues.
Once you have your budget ready, make sure that you go over it at least every 3-4 months. This allows you to look at the church budget and make sure that it is still in line with what you expect. Think about it, you have to be aware of changes like an added expense or if there are shortfalls within it. Make sure there is a protocol for both and this needs to be addressed om advance so you’re never caught off guard.
It’s never too late to start your budget and it will give you an entirely different outlook from here forward.
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