One aspect of financial stewardship is creating and monitoring a church-wide budget. A budget is a product of leadership deciding how it intends to allocate the church's finances. If your church hasn't formalized an annual budgeting process, here's a simple method to help you get started.
Step #1 Review Actuals
Before you try to determine what to budget for facilities maintenance, salaries, office supplies and other line items, it helps to know what you've spent in the past. Run reports from your financial system to see how much the church spent on various expenses the last 1-5 years. Viewing that time span of data will help you see spending trends such as whether you're spending 10% more each year on salaries. Use this information as a starting point for the budget of each line item.
Step #2 Budget by Department
Ideally, the finance director shouldn't do all the budgeting. Instead, provide each department leader with the actuals information from prior years along with a template for budgeting for the upcoming year. Set a deadline for all department leaders to provide their proposed budgets.
The first time you do this, meet with them to discuss the prior year numbers and explain how the budgeting process works.
Make sure they budget for any revenue generating activities along with expenses (if they'll host an event and will sell tickets, sell t-shirts or other items, etc.).
Step #3 Consolidate
As each department leader submits the budget, consolidate those into a full church budget. Add any line items not covered by department leaders (mortgage payments, etc.).
Step #4 Analyze
Carefully analyze the budget to see if the numbers are reasonable based on your experience and prior year trends. Here are a few things to consider:
Review how much each line item differs from prior year actuals. What is the logic behind that variance? Does that explanation seem reasonable?
Determine if the totals add up to a gain or loss for the year. If it looks like the church will lose money, you'll need to decide what expenses to cut or see if the income estimates make sense.
Does the budget take into account any significant changes you plan to make in the upcoming year (building renovations, equipment upgrades, adding personnel, hosting a new event, or other big activity)?
Step #5 Review with leadership
The process for this step depends on how your church leadership is structured. You may need to review the budget with your finance committee, the elders, or other groups. For these discussions, it's important you provide more than a spreadsheet of budget figures. Start off the conversation by highlighting the process you used to create the budget, what drove changes from prior year's actuals, and how the budget supports the church's vision for the coming year. Once you've established those factors, then provide as much detail on the budget as each group wants or requires.
Step #6 Revise or Finalize
You might receive feedback that leads you to make changes to the budget during the review process. As that happens, make the necessary changes and resubmit per your church's approval process.
Finalize the numbers once each group has reviewed and approved the budget. This may include entering the budget figures in your accounting software so you can run reports in the coming months to compare the budget versus actual totals for each line item.
Budgeting can be a long and controversial endeavor as everyone has an opinion on how to manage money. There's one step you'll want to weave throughout this process, and that's prayer. As a team, ask God for wisdom, direction, and unity as you seek to determine how best to manage the finances He entrusts to you. Pray, do your due diligence as a team, and adjust the process as needed to make it optimal for your church.