It’s embarrassing to admit, but when I went into full-time ministry as the Pastor of Business and Finance, I didn’t even know when the fiscal year at my church started. Around August, I realized that the fiscal year begins in October, and we needed to produce the annual budget – fast. As I mentioned the need to build the church budget to the team, I was surprised at the various methods used to submit them. Some simply responded with an email reply, “Same as last year.” Others put a number (yes, a single number) on a sticky note, and some provided a spreadsheet with a detailed listing of their proposed expenses for the upcoming year. Since it was my first budget with the church, I had no idea what it was missing, what it should include, or how to know if the church’s finances could support the proposed plan. I was running out of time and feeling stressed out. Since this was all happening in 2006, there wasn’t a lot of information about church budgeting on the internet. It was such an awful experience that it became my mission to improve the process.
Some may think I’ve overcorrected, because it’s mid-April, and I’m beginning the church budget process. Yes, that’s almost six months before the budget is due. Why? I know that it takes time to prepare all of the elements necessary to build an effective church budget that supports the church’s mission. If you’re new to church budgeting or investigating the possibility of improving your church’s process, here are a few tips that may help prepare for a smooth and successful budget season.
Identify Goals for the Upcoming Year
Every year, the church’s leadership needs to set aside time to prayerfully consider what it needs to accomplish to fulfill its mission. An annual planning meeting is essential because each year will have a different financial focus based on the goals the church wants to achieve. For example, is the church planning to hire a new Youth Pastor? Is this a full-time position or part-time? What about benefits? Or maybe the church wants to start a new local outreach program to help address the underresourced in the community. What kind of resources are required? What if the church decides to increase the number of students who can attend camp and wants to reduce the cost to make it more affordable? All of these are good things – and they all have an expense attached.
Identifying the goals and determining the cost to achieve them helps set the budget priorities. Providing a clear understanding of priorities makes it easier to say “yes” to some things and “no” to others.
Prepare Guides for Church Budget Stakeholders
As hard as it is for me to grasp, not everyone gets as excited about the budget as I do. For many, it’s a chore to complete a budget, not an opportunity to dream about how the financial resources can fulfill the church’s mission and vision. Over the years, I developed a church budgeting guide that we provide to each area requiring financial resources. The guide is simple:
- Objectives – list the objectives for your area of oversight for the upcoming fiscal year.
- New Resources – estimate the cost of new resources necessary to accomplish the objectives.
- Dream Project – identify other projects or events that you would like to do that are not directly tied to the objectives.
- The guide also provides the leaders with a list of expenses based on the prior 12 months, detailing the COA (Chart of Accounts) and costs. Listing the area’s expenses is a great way to provide a baseline to identify current expenses and ensure they don’t miss recurring costs in the budgeting process.
- The bottom of the page adds the new resources, dream project, and ongoing expense totals for a requested budget total.
Creating the guide is an investment in time that helps ensure consistency across the board and provides the data needed for the budgeting area to make a thoughtful budget.
Draft the Projected Income
In case you’re wondering, yes, six months before the end of the fiscal year is too early to project the income. But that doesn’t mean you cannot start gathering data and building the spreadsheet that determines attendance and giving trends that produce the projected income. If you’re new to church budgeting, I recommend reading Church Budgeting 102; it provides step-by-step instructions with examples to help build this cornerstone of the church budget.
It’s never too early to start thinking and planning for the next fiscal year. The best way to prepare for the road ahead is to identify the goals, provide guides to walk those budgeting through the process and get a head start on calculating the projected income. Happy budgeting.
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