Do you know the kind of person where everything seems to go their way? I’m not talking about working hard and getting a promotion, working out and getting better at a sport, or getting an education and getting the job you always wanted. I’m talking about the person who is usually the 10th caller on a radio show and wins the prize or whose number is selected more often than anyone else at raffles. Yeah, I’m not that person. I’m not sure I’ve ever won anything that wasn’t performance-based.
Not surprisingly, within the first month of entering full-time ministry, the Lead Pastor came by my office and asked what I was doing. When I explained my plan to dig into the details to wrap my head around the church’s finances, he said, “Oh, you’re a grinder.” I wasn’t sure how to take the remark, but I decided it was a compliment and continued plugging away. As a grinder, I read a lot of information from experts, listen to podcasts, and put in long hours. I’ve come to embrace my “grinderness” as it fuels me to improve things, like budgeting at our church. As we are currently in the throes of the budget process, one of the most significant improvements we’ve made is the budget assumption report provided to the board as the first step of approval for the budget season.
Budget Assumptions
Church budget assumptions provide a report summarizing the estimated donations and expenses for the upcoming fiscal year. The information comes from the previous year’s data to show trends and improvement areas. Whether you’re new to church budgeting or a seasoned veteran looking to improve your processes (aka a grinder), this template for church budget assumptions may help you.
Cover Page
The cover page sets the stage for the report by providing five assumptions for the budget:
- General Assumptions lay out the overall objectives of the budget. For example, to create a realistic budget based on trends and projections, it should state strategic plan objectives and how it aligns with the church’s mission, vision, and values.
- Compensation is typically 45%-55% of the entire church’s operating budget. It’s essential to define some basic assumptions about compensation. For example, it should specify any COLA (Cost Of Living Adjustment) or merit increases. Define personnel changes such as new positions, eliminated positions, or staff realignment.
- Operations should briefly explain changes to the operations budget, like the addition or suspension of sinking funds.
- Ministry needs to stay at the 10,000-foot level on the summary page and describe the ministry goals in a sentence. For example, the ministry team will implement the Ephesians 4 equipping model with all volunteer teams.
- Stewardship shows the plan to increase generosity in the church. For example, begin sending letters to large donors and first-time givers and offering classes like FPU to promote stewardship.
KPIs (Key Performance Indicators)
When creating the budget projection for the upcoming fiscal year, use the KPIs (Key Performance Indicators) like attendance, giving, and cash flow to gain insights into the church’s position and performance.
- Attendance compares the average weekly adult attendance from the current year to the prior and determines the percentage of growth or decline. It should also show the average weekly total attendance and determine the growth or decline of total attendance. The average total attendance gives insight into the effectiveness of the children and student ministries.
- Giving data should include the percentage of increase or decline when comparing the total giving of the current year with the prior. A comparison of average giving per person per week is also helpful when determining the budget target. Finally, include a comparison of the number of giving units when comparing the current year with the prior.
- Cash Position shows the balances of all bank accounts from the beginning of the fiscal year until the time of the report. It’s a quick way to present the cash flow for the fiscal year. Be sure to note any bank covenants and requirements to show if the church complies.
Budget Projection (Target)
All of the data leads to this critical page – the budget projection for the upcoming fiscal year. Here’s an example:
Based on KPI Projections:
- Average Weekly Adult Attendance is 750
- Average Giving Per Person Per Week is $65.00
- Growth Factor (based on the average weekly attendance trend) is 4.16%
- The Budget Projection is $2,640,456. (An increase of X compared to the prior year’s fiscal budget of $X.)
Church budget assumption templates like this help to guide the dialog between the financial team, the board, the staff, and the ministry leaders by defining the method and data used to arrive at the projection.
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