Finance Fridays: Church Budget Nuts & Bolts
Since budgets are something I deal with almost daily, and December marks the end of the fiscal year for many churches, I thought it was time to share a little bit on budgets. While there are MANY philosophies on how to create a budget, most churches break down into one of two catagories:
- Those who budget with the expectation that growth will happen and help them meet expenses. These churches tend to budget a revenue increase of 10+%
- Those who prepare forward budgets based on historical actual results. These churches may increase, or even decrease, projected revenues and expenses.
Regardless of your philosophy, it is essential to start with an understanding of where the church currently stands and what your church’s vision and ministry goals are (both short and long term). Personally, I like to create two budgets: a budget using a flat line as well as a “hope/wish/faith budget” relying on growth. With both of these budgets expenses can be broken down into three BROAD categories. While these categories are fairly standard (in that nearly all churches have these types of expenses), the percentages assigned are based off of my experience of what works well:
- People/Staff (40%): Without Vision the people perish, but without people, there can really be no sustainable vision. This is vital, and generally your staff will pay for themselves through increased attendance and involvement of the congregation.
- Programs/Facilities/Overhead (30%): This is earmarked for things like coffee (essential!), rent/mortgage, light bill, insurance, phones, signage, and so on. This line can easily be a much higher percentage, limiting your ability to invest directly in your ministries. Don’t let this take over!
- Missions/Ministry/Savings (30%): I really like to earmark each of these three as 10% of the total budget:
- 10% for Missions: Habitat for Humanity, supporting missionaries, digging wells in Africa, or whatever your church embraces
- 10% for Ministry: This goes towards any ministry program costs not covered under the above categories
- 10% for Savings: These funds allow for financial stability and unexpected growth opportunities. This is also a good way to model this discipline for your congregation
Creating a budget is always easier than sticking to it, but if we are going to model good stewardship to our congregations we must get this right. Communication is key to successfully navigating your budget throughout the course of your year. Remember to communicate your financial information clearly and often, sharing updates as appropriate, and making changes when needed.
How does YOUR church approach the budget?