The budgeting process probably isn't your favorite ministry activity. In fact, you may question my use of the word "ministry" in association with developing a budget. However, the act of planning for your church's financial future supports the ministry and vision of your church.
As the chief operations manager at First Baptist Tulsa, Bobby Hart guides the staff and key volunteer leaders through their budgeting process. He puts it this way, "
Budgets create accountability between ministry leaders and the church at large, and therefore increase trust."
We can all agree that budgeting is a necessary and helpful process, however, it can be frustrating without a plan.
Here are seven steps to make your budgeting process more effective and less stressful:
Step #1: Gather the facts
- Consider what you've done in the past and research what other churches have had success in doing.
- Review your church's financials for the last 3-5 years and study the trends.
- What did you spend money on and when for each department or ministry program?
- How much money came in and from what sources?
- Obtain a church staff compensation study to see if what you're paying staff members aligns reasonably with what other churches are doing.
- Review the trend month-over-month from the prior year.
- Are monthly income amounts increasing, decreasing, or about the same? What can you infer from this information to help you estimate monthly income for the upcoming year?
What expenses remain about the same each month (utilities, salaries, etc.) vs. which do you incur during key times of the year (conferences, special events, etc.)? Account for those variations in your budget for the next year.
As Bobby Hart notes, "Another key is staying on top of historical receipts to ensure your budget is realistic. We always leave room for the Lord to work, but we base any increases or decreases on what we know. It's a lot more fun to see God bless a ministry you have planned conservatively for than to pull back ministry plans because funding isn't available. Finally, we always ask our ministry leaders to dream. Don't simply repeat the same ministry plan as last year with a slight increase. This stretches them to think creatively about ministry and allows the Finance Committee a glimpse into where ministries are heading, even if we don't approve all of the dreams'."
Step #2: Consider what will be different this year
Chances are you're not going to do exactly the same things every year. Here are a few areas to consider:
- Do you have any facility maintenance activities due this year?
- Does the parking lot need to be repaved?
- Does your HVAC system need to be replaced?
- What about your technology?
- Is your software due for an upgrade?
- Are your computers outdated and need to be replaced
- Do you plan to hire any additional staff this year? If so, in what role(s) and when? Don't forget to budget for the hiring process.
- Have any laws or regulations changed that would impact the budget? Consider insurance, compensation packages, housing allowances, etc
Step #3: Align the budget to your goals
This is the fun part of budgeting (yes, fun and budgeting can be in the same sentence). Hopefully, you've already led your team through a goal / visioning session for the year ahead. Now you get to assign dollars to those goals.
Step #4: Save for the unexpected
Sometimes we get wonderful, unexpected surprises like an opportunity to buy adjoining property to expand your ministry. There's also the possibility for events like needing to replace the roof or an expensive piece of equipment breaking down. It's wise to plan for both occurrences, so having a church savings account and budgeting for it is key to being a good steward.
- What are the savings goals for the church?
- Are you saving up for a renovation?
- Do you put money aside in case tithes decrease for a month or two?
Step #5: Involve your leadership team in the budgeting process
Whether you're the Senior Pastor, Executive Pastor, Church Administrator, or have a CFO-type role, you shouldn't create the budget by yourself. For one, you're not going to have all the information necessary (nor should you have to). Also, it's best when your ministry area leaders are responsible for submitting their budgets and discussing their rationale with you. The process of creating a budget will get them thinking about exactly how to make their goals a reality.
Once your annual goals are ready, discuss the budgeting process with your leadership team.
- Ask them to draft and submit an initial budget for their respective areas.
- Give them a deadline and setup one-on-one meetings with each leader to review the draft.
- Once they've made any agreed upon adjustments, bring the full team together to discuss budgets. Quick tip: Use wisdom in how you represent salaries as a budget item. It's usually best to budget for the number of employees and at what level (manager, etc.) instead of by dollar amount for this type of meeting.
- When the team reviews the full budget together, use this opportunity to make sure each leader is aware of the goals and efforts of the other ministry areas. This helps break down silos and enables your team to support each other's goals.
Once you have a budget your team supports, review it with the parties responsible for approving it (an elder board, etc.).
Step #6: Monitor budget vs. actuals on a monthly basis
Establishing a budget is great, however, it's not worth much unless you monitor how you're actually doing compared to the budget.
- Review a financial report each month that shows the budget vs. actuals. You'll also want the same report broken down by ministry area.
- Provide the report by ministry area to the respective leader and ask him/her to provide you with an explanation of any variances (where the amount budget is over/under the actual amount). Then review that information with each leader.
- Review the overall budget with elders, board, or other governing body.
Step #7: Report out to your congregation
There are two key reasons why I recommend providing your congregation with at least an annual update on the church's finances.
Letting your congregation know how their tithes were spent builds and maintains trust. Unfortunately, we've all seen news stories of church or ministry leaders who've mismanaged church funds. Trust is a key component for anyone considering giving money to a church. They need to trust that you and your team will be excellent stewards of the money they're tithing.
This sharing of information also lets your congregation know how the church is impacting your community, caring for its members in-need, and fulfilling the vision of the church.
Budgeting doesn't have to be a painful process. With diligent planning and attention, this can be an effort that truly advances and supports the vision of your church.
Deborah Ike (formerly Wipf) is the President & Founder of Velocity Ministry Management; a company dedicated to vision implementation for church leaders.
In addition to serving in ministry, Deborah has worked in the corporate arena to discover how to leverage business principles for ministry vision. She worked for an international consulting firm and a Fortune 500 company doing consulting, project management, and risk management.
Deborah is certified as a Project Management Professional (PMP) through the Project Management Institute. She's the author of The Volunteer Management Toolkit (Church Edition) and you can find her articles on sites such as WorshipFacilities.com, Pastors.com, XPastor.org, and via The Church Network.