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A strong financial foundation is crucial for any church to thrive. Building a well-constructed budget allows your church to be a good steward of God’s resources and fulfill its mission effectively. This article outlines a step-by-step process to guide you through the budget-building journey. In some cases, these steps may not be possible or necessary, but for the sake of this article we will focus on the ideal scenario.
Utilize a Finance Team/Committee:
The first step is to assemble and use a dedicated financial team. This group doesn’t need to be large, but it should be diverse. Most churches have a process by which these teams are created, but they should be looking for individuals with financial expertise, preferably an accountant or someone with strong financial literacy. It’s also valuable to involve representatives from various ministries within the church. This ensures different departments have a voice and their needs are represented in the budget.
Take an Assessment:
Gather your church’s financial records from the previous year(s) and analyze income statements and expense reports. These documents will shed light on your current financial picture. You need to look at all income streams like general tithes and offerings, missional giving, designated funds, and any other gifts that might come in consistently.
Projecting Realistic Income:
You will need to establish some method of estimating your income for the upcoming year. Analyze giving trends from the past year, consider any seasonal fluctuations. Factor in any planned capital campaign giving and/or investment income you might have. Be realistic in your projections; overestimating income can lead to budget shortfalls later. Consider budgeting on 90% of your previous year’s income. This practice promotes good stewardship in your church body.
Projecting Expenses:
Expenses can be categorized into fixed and variable costs. Fixed costs remain constant throughout the year, such as salaries, rent/mortgage payments, and utilities. Variable costs fluctuate depending on activities, including ministry events, supplies, outreach programs, and worship service expenses. Don’t forget to account for debt repayment if you have any outstanding loans. Do your research and find out what these expenses actually cost the church. You may need to run reports or look over amortization schedules to discover what you are going to spend in the upcoming year.
Budget Cash Reserves:
Unexpected repairs or inconsistent giving can be stressful. Having financial reserves allows you to weather these storms with ease. Reserves also allow you to consider future initiatives, such as building renovations, technology upgrades, or new ministry programs. This could arguably be the hardest principle to implement. Many might say that you should spend what you have, God will provide. I believe this to be true, however, I also find further wisdom in Proverbs 21:20 that says “Precious treasure and oil are in a wise man’s dwelling, but a foolish man devours it.” Equally important to having reserves is a plan by which you spend these reserves. These shouldn’t be considered “rainy day funds” because they have a purpose. Your finance team should develop a plan for these dollars. “How much?” is usually the first question that comes to mind. There are many theories out there but consider starting with three to six months of your current monthly expenses.
Create a Strategy:
Once you have a clear picture of your income and expenses, it’s time to prioritize. Your budget should be a clear representation of your church’s mission and ministry. Allocate resources to ministries and programs that emulate your mission. Utilize a zero-based budgeting approach where every dollar of income is assigned to a specific category. This ensures intentional spending and avoids unnecessary overspending. Creating a consistent strategy will make your budgeting process easier each year.
Communicate:
Once your team has crafted a budget, present it to the church staff and leadership. Once your church leaders have affirmed the budget, begin the process of presenting the budget to your church. You might consider a time for members to ask questions before the budget is affirmed by the church. This transparency fosters and encourages a culture of stewardship within the church family.
Monitor Your Budget:
A well-built budget is a living document, not a rigid blueprint. You should have someone who watches spending patterns and tracks your income and expenses throughout the year, comparing actual figures to your budgeted amounts across your various ministries and operational costs. Be prepared to adjust your budget as needed based on unforeseen circumstances, changes in giving patterns, or unexpected expenses. Use reports and year over year records to help monitor the financial health of your church.
A Budget is a Tool for Ministry:
Building a church budget is an essential act of stewardship. It allows you to manage your church’s resources wisely, ensuring the long-term sustainability of your ministries. By following these steps and incorporating these additional tips, you can create a budget that fosters financial health, strengthens your church morale, and allows you to fulfill your mission effectively. Remember, the budget is not simply a financial document, it’s a tool for ministry. There are lots of resources available to help with budgeting and maybe your church is at the point where you need outside help with crafting a budget or outsourcing some of your financial needs.
Need Help?
There are lots of great ministry partnerships that can help with many of the modern-day church financial requirements. Some churches may be at the point where they are ready to outsource all their financial tasks. Many churches in our state have hired WatersEdge ministry accounting (www.watersedge.com) to do their accounting, payroll, and contribution tracking. WatersEdge has a vast team of people that can handle all of your accounting needs. The Arkansas Baptist Foundation would love to help you with any of these actions. You can visit www.abf.org or contact Patrick Henry at [email protected] for more information on how the Foundation or WatersEdge can serve you.