As churches look at the upcoming fiscal year’s budget, it’s not uncommon for the budget projection to be flat or down in these uncertain financial times. During inflationary periods, this usually means more dollars spent on operational costs and fewer dollars left to invest in fulfilling the mission. Many churches are left wondering how to invest more dollars in thriving ministry areas or go after new pursuits God is leading them to. Since spending beyond the resources provided is lousy stewardship and usually ends in a financial crisis, a better strategy is to evaluate the budget and look for areas of overspending. Here are the top three suggestions to look for overspending in your church.
Compensation
Let’s start by acknowledging the elephant in the room; the vast majority of people in ministry are underpaid. Please don’t use this as an endorsement to promote wage stagnation or pay cuts to the church staff. Ministry is hard work, and as the Apostle Paul wrote in 1 Timothy 5:17, “The elders who direct the affairs of the church well are worthy of double honor, especially those whose work is preaching and teaching.” When churches evaluate the compensation for their staff, they must do so with care, compassion, and comparative metrics. Keep in mind that there is no such thing as a one-size-fits-all solution for compensation percentages. But there are excellent tools to help guide churches through using best practices and remaining healthy. There are two standard metrics to use when evaluating compensation: the percent of compensation to the total operating budget and the number of full-time equivalent (FTE) employees to the size of the congregation.
Of the two methods described, when it comes to overspending on compensation, it’s more likely due to too many paid employees per congregation size than overpaying the staff. Tony Morgan and his team at the Unstuck Group recommend a 75-100:1 congregation-to-staff ratio. That means you should have one FTE staff person for every 75 to 100 per person in attendance. Calculating an FTE is relatively simple and is based on a 40-hour workweek or 2,080 hours annually. To determine a church’s FTE, add all employees’ total annual hours and divide that total by 2,080, giving you the FTE number. Then divide the average weekend attendance (including adults, youth, children, and volunteers) by the FTE number to calculate your church’s FTE ratio. Churches with fewer than a 75:1 ratio may find their staff too big.
Ministry
The last thing a church wants to do is defund a healthy, thriving ministry. That’s why it’s so essential to determine ways to measure the effectiveness of each ministry. For example, even if the Senior Pastor’s wife loves running the cassette tape ministry, it’s been ten years since anyone picked one up; it’s time to reallocate that money toward improved online streaming equipment. While this is an exaggerated example, it shows that when it comes to funding ministry, there should not be any “sacred cows.” Church leaders must lead without fear and be willing to have uncomfortable conversations (in love) to pursue the mission, vision, and goals.
Outreach (Missions)
Jesus made it clear in Matthew 28:19-20 the mission of the church is to “Therefore go and make disciples of all nations, baptizing them in the name of the Father and of the Son and of the Holy Spirit, 20 and teaching them to obey everything I have commanded you. And surely I am with you always, to the very end of the age.” Churches need to invest financial and human resources toward this vital mission. With that in mind, churches must annually evaluate the effectiveness, fit, and alignment of supported missionaries and local outreach partners when building the budget. Instead of committing financial resources to anyone and everyone that asks for support, churches should create a grid or matrix to determine a set of qualifications for financial support. If your church finds that it needs to withdraw funding, be sure to provide as much notice as possible to allow the missionary or partnering group time to seek additional resources.
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