Church Executive CHURCH EXECUTIVE NOV-DEC 2017 DIGITAL | Page 13

A
budget is simply a financial plan for a period of time. It consists
of expected income such as tithes, offerings, rent from facility use,
and bequests and gifts, as well as other sources by which the
church realizes income. Planned expenditures including mortgage payments,
salaries, employee benefits and expenses, office expenses, charitable giving
and buildings and grounds maintenance. Sunday School and other education
program expenses also need to be factored in.
A budget is built upon certain assumptions. Those assumptions might
not always prove to be true, so your budget needs to be flexible, not rigid.
This will account for changes that might occur during the fiscal year, such
as receiving more gifts than expected, or having to make unexpected
repairs to your building.
Remember: it’s a plan, not the law.
How to build a good budget
There are basically three approaches used to build a budget. 1 Deciding
which one is the right one for your church depends on your church’s
individual needs. The first approach, Incremental Budgeting — also known
as line item or traditional budgeting — is a popular budgeting process
among churches. Incremental budgeting takes the current year’s budget
as a basis for the next year’s budget and adjusts each item for anticipated
cost increases / decreases or activity changes. While this approach might
be expedient, it is not as thorough or as accurate as other budgeting
approaches.
The second approach is Zero-Based Budgeting, a process in which each
line item is built from the ground up, starting with zero rather than
the prior year’s budget. This is a very challenging and time-consuming
process. However, it is useful for organizations, such as churches, whose
programs and methods of operation carry forth year after year without
change. Experts suggest zero-based budgeting as a useful approach about
every five years to provide a fresh look at all programs and activities.
The third approach, Program Budgeting, evaluates all programs and
activities based upon their effectiveness at their current levels of funding
and on their potential. The church identifies each program or activity, the
needs each program serves, and the past effectiveness of meeting those
needs. The second step in this approach is to establish a target budget for
the upcoming year. This could be based on funding, pledges received, past
levels of giving and projected growth, assessed needs or a combination of
these criteria.
Once you have decided upon the budgeting approach your church
will take, you will need to set goals and define objectives that will allow
you to accomplish your mission. A well-thought-out budget allows your
church to be effective in achieving its annual goals. Creating the budget is
an important step in being a good steward of the resources God provides,
so that the work we do serves God and helps people in ways that make a
difference in our communities and the world.
Get staff involved
Staff members who take some type of ownership for the budget are
more likely to respect it throughout the year. Most congregations have a
committee on finance and stewardship. The committee can consist of the
pastor, the church treasurer, and the board of trustees.
The committee might conduct a study of the current year’s financial
performance, collect proposed program estimates from various
departments within the church, and propose a budget.
Once the budget is approved, it must be administered throughout the
year. This is accomplished through monthly comparisons of how much
money is coming in and going out. Completing this exercise will allow
you to identify which line items in your budget are deviating from the plan
and act to eliminate the variances. Programs might need to be trimmed,
or purchasing equipment should be delayed, in order to keep the budget
balanced. Regularly reviewing the budget will keep the pastor informed
on what has been spent and what is remaining.
All of this may sound like a lot of work, but it’s worth the effort to know
that your church’s finances are under control. Instead of being a source of
angst, budgeting should be a way for your church to achieve its mission
and do the work of God in your community and the world.
Rev. Dr. Perry J. Hopper, associate executive director at MMBB Financial
Services, oversees all aspects of denominational relations and is responsible for
coordinating special programs that support MMBB’s mission.
Rev. Dr. Sara E. Day, CFP ® brings extensive experience in serving churches to
her role as Director of Employer Relationship Management for MMBB Financial
Services. In addition to fulfilling the service needs of MMBB employers and their
staff in the Midwest for eight years, she served as senior pastor and director of
campus ministry at the University Baptist Church in Columbus, Ohio.
1 FreeChurchAccounting.com, How to Create a Church Budget
[ freechurchaccounting.com/churchbudget.html ]
CHURCH EXECUTIVE.COM | 13