At Church of the Foothills we’re in the middle of our budget prep time. It’s interesting how different people react when it comes time to create a budget for their ministry (yes, I know it’s God’s Ministry). There are those who have no problems in creating a budget; there are those who dread working on a budget; and then there are those who believe the sky’s the limit when they prepare their budget.
Each church has its own process, some use a finance committee and others have the Governing Board prepare the budget. At Church of the Foothills the Pastors and Directors prepare the budget. There are many approaches to the process. Below are some general tips to help.
1. Align the budget with the missions and goals of the church.
If the vision of your church is to reach the lost are you funding different efforts to make that happen?
2. Allow yourself enough time. Don’t rush the process.
3. Consider the giving and attendance trends of the church
Giving and attendance trends are very important. This information will help you plan the budget accordingly. Remember, higher attendance does not always mean higher income. Most churches will have higher attendance at Easter and Christmas, and the trend for many churches is that these are low giving events.
4. Be a good steward
Do not expect an increase in giving if stewardship is never talked about or taught from the pulpit. Celebrate events and remind the people that this event could only happen because of the financial gifts from the members of the church. The church needs to be a good steward as well.
5. Don’t be surprised by unexpected expenditures
Most churches are surprised when the AC unit fails, or there’s a leak in the roof. Is your church doing equipment inspection and maintenance? Are you putting funds away for that rainy day?
6. Plan for the Reserves
There are different schools of thought when it comes to reserves.
If you pay $20,000 for an AC unit with a twenty-year life expectancy, you should be placing $1,000 per year in a reserve account. There are different formulas to use.
You can have a 1, 2 or 3-month Operations Reserve, based on the average monthly expenses for your church. The total can be adjusted to cover fixed costs as well as salaries.
Cash Flow Reserves:
For all churches there are good months and tough months. Your giving and expenditure trends will clearly show you in what months you will have extra money and in what months you will fall short. Put away the extra income until it is needed.
7. Find the right type of budget
Take a number and divide by 12: This is the type of budget where the totals for each ministry are divided by 12. For example, your church does a large Christmas Program and you budget $12,000 for the event. When that number is divided by 12, the Church Event Budget will show $1,000 each month. The problem with this model is, there will be a majority of months where there are no Christmas Expenses (so you would be under budget), but in November and December when most of the expenses will occur, you are way over budget. The problem with this model is that it does not present an accurate picture of the income and expenses.
Cash Flow Budget: In this budget model the budget shows the true income and expenses in the months that they take place. Using the example above, the expenses would be budgeted in the months of November and December. The other nice feature of using a Cash Flow Budget is that you can shift some of the expenses from low-income months to higher income months. Remember some months have 5 weeks, so budget accordingly.
8. Surround yourself with the right people
If you’re using a committee, they should be involved in the church, be generous givers and people of prayer. You need to be able to trust these individuals, as they will be dealing with some of the most sensitive information: where the money goes and where it comes from. Get feedback and opinions from your finance staff.
9. Keep and use accurate records and notes.
Your accounting system should be able to tell you where every penny was spent with details as well as where every penny came from. Keep notes on the budget process. What items didn’t make the budget, and what concerns are there. This information will be very helpful.
10. Be conservative.
This is where many Pastors make a fatal mistake. I fully agree there is a spiritual side to the income of churches. God blesses those that are faithful, and we should never ignore that. However, when I hear Pastors predict a 40% increase in giving, I ask why, their answer is “faith.” I want to applaud their faith, but at the same time, being conservative is not a lack of faith; it is an exercise in wisdom. If God decides during the year to bless you with a huge increase then you can easily adjust the budget, but there is nothing more demoralizing than to not make budget.