Lesson 101 of the Church Budgeting basics series provided an overview of integrating the goals and focus of the upcoming fiscal year while remaining rooted in the church’s mission and vision. This process allows the stakeholders to dream and strategize how best to accomplish the goals and initiatives. Lesson 102 covered the basics of building the projected income using the 12 months of attendance and giving data. With the income side of the ledger set, it’s time to build the expense projections.
Start with Ongoing Expenses to the Church Budget
As the ministry and operations teams begin the process of projecting the expenses for the upcoming fiscal year, the financial team needs to provide each area with the previous year’s spending. A detailed report of the last 12 months’ expenses provides a comprehensive view of ongoing expenditures. However, even though it’s a current expense doesn’t necessarily mean the costs listed will continue – and if they do, it’s unlikely they will remain at the current rates. Inflation is hitting everyone, even churches. For example, the Bureau of Labor Statistics’ latest Consumer Price Index (December 2022) shows energy services are up 15.6% compared to the prior year. Here’s a short list of ongoing expenses likely to continue in many churches: Utility bills (electric, gas, water, trash, etc.), mortgage or rent, taxes or assessments, insurance, maintenance and repairs, curriculum, music and video licensing, marketing and advertising, snacks, etc. (Please note that compensation is not listed. For most churches, compensation costs take up between 45% and 55% of the entire budget, and that’s a big deal. Because of that, lesson 103-E (exempt employees) and 103-N (non-exempt employees) will cover how to project compensation separately.) Using detailed reports that provide at least 12 months of data helps ensures the inclusion of monthly, quarterly, and annual expenses in the budgeting process. Each ministry and operational leader needs to evaluate the line items to determine if the cost is ongoing. If so, project the increase (or decrease) to this good or service. Once the stakeholders calculate the ongoing expenses, it’s time to define the costs of accomplishing the new initiatives and goals for the year.
Project Expenses to Accomplish New Goals and Initiatives
Praying, strategizing, and dreaming about what God calls the church to accomplish in the upcoming year is exhilarating, and it can be hard to contain the excitement. But planning is still required, and it starts by calculating the costs – which is a lot less fun and time-consuming. On top of that, many variables could complicate establishing an actual price for the new initiative, further confirming the need to start the budget process early. For example, if a church determines God is calling them to have a more significant presence in the community by building stronger families, what does that require? A family camp? A multi-week class offered to the community? Both? What costs are associated with either or both of those options? Does the church write its curriculum or purchase it? Run the event on campus or go to a local camp? Is this a time to partner with other churches? As you can see, the budgetary implications will vary greatly. Remember, this spans all ministry and operational areas.
A Simple Tool To Help
Because projecting the expenses of the church budget requires calculating ongoing costs and determining the estimated cost of new goals and initiatives, it’s best to keep the report simple. Here’s an example of what to provide for each department:
Projected Ongoing/Current Expenses:
|Amount||Chart of Accounts w/Description|
List the top three objectives (goals or initiatives) for the upcoming fiscal year.
List the resources required to accomplish the new objectives.
|Amount||Description – include COA|
Requested Budget for (Ministry or Operations Area/Department)
Place the sum of the totals of each area listed above in the corresponding areas here:
|Amount||Description of Area|
|$||Total Projection of Ongoing/Current Expenses|
|$||Total Projection of New Resources|
|$||Total Department Budget Projection|
Now that the ministry and operational expenses are complete, it’s time to submit the projections to the financial team to compile and see how it matches up against the projected income. Lesson 104 provides the structure to compare and adjust.short url: