I distinctly remember last year, on New Year’s Eve, when my wife and I were traveling home from a wonderful getaway, we set some very specific personal goals for the upcoming year. Throughout the year, there were many times when we wanted to deviate from the plan and do something else, but we would remind each other of the goals. When December rolled around, we looked back and saw how setting goals and finding the discipline and accountability to stick with the plan allowed us to achieve things we never thought possible.
There is something invigorating about the start of a new year. It provides a clean slate to leave the prior year and all of its trouble behind and establish and pursue new, fresh goals. As churches look forward to all that God wants them to accomplish in 2024, here are five goals for creating the budget.
Create a Realistic Budget
The budget is the cornerstone for anyone attempting to manage God’s financial resources well. John Maxwell perfectly described a budget when he said, “A budget is telling your money where to go instead of wondering where it went.” Without underselling the complexity, time, and gravity of constructing an effective church budget, there are three basic steps:
- Define the Goals – Each year, the church budget should define the specific goals it intends to achieve. The goals should support the church’s mission and vision.
- Project the Income – A church budget must accurately forecast the income for the upcoming year. Determining the projected income requires an analysis of your church’s giving and attendance trends.
- Project the Expenses – A church budget must accurately project upcoming expenses based on historical reporting data and new initiatives. When projecting expenses, factor in essential costs like compensation (typically 45%-55% of the operating budget), operational costs (factor in inflation), and ministry costs.
Review Progress
Building a budget is a major component of stewarding (managing) God’s resources well within the church. However, neglecting to monitor the income and spending progress could lead to missed opportunities or a financial disaster. Every church needs to follow basic accounting principles and run monthly financial reports to review the income and expenses against the church budget. However, it’s important to note not all months are equal; some months, like December, typically have higher giving than January. The same is true for expenses; some months have higher expenditures due to annual or quarterly payments. Even utility bills fluctuate based on the season. Because of the fluid nature of donations and spending in most churches, avoid making drastic financial decisions based on a single month. Using quarterly reports often gives a better picture of the church’s progress in meeting budget goals.
Invest in a Digital Giving Solution
It’s not a secret that the post-pandemic church demographics look different than church statistics prior to 2020. According to a 2022 Barna report, Millennials now comprise the most significant increase in new church visitors. Because these generations are digital natives, churches must find ways to embrace the digital culture, and online giving is a significant component.
Build Funds
Every business and homeowner knows that everything eventually wears out and requires replacement and that emergencies happen. That’s why church budgets must include two essential funds:
- Emergency Fund – An emergency fund takes care of unexpected and sudden expenses. Churches should keep between 40 and 80 days’ worth of expenses in an emergency fund.
- Sinking Funds – A sinking fund is a way to strategically plan for the eventual replacement of large purchase items such as a roof, HVAC, or sound system. The key word here is plan. A sinking fund takes care of future costs.
Establish and Maintain Trust
Donors typically don’t give to organizations that they don’t trust. Establishing and maintaining trust, especially with the Millennial and GenZ demographic, is essential for churches. Ensure the church’s financial team creates policies and procedures that adhere to generally accepted accounting principles. On top of that, provide church leadership (board) with monthly reports generated from the accounting system. Share financial information with the congregation at least once a year via an annual report or meeting. Always submit the financial books to a third-party CPA for a yearly review or audit.
Setting strategic, measurable, achievable, relevant, and time-based (SMART) goals is half the battle. Staying disciplined requires a team to keep each other accountable to accomplish these goals. Come December, your church may look back and see that it accomplished everything God has planned.
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