The church facility where I serve is a converted industrial building in Southern California. Specifically, the building is in Temecula, known for its warm and dry climate, with an average yearly rainfall of only 14 inches. But, even in Temecula, roofs that leak can create a lot of havoc, and our church desperately needed a new roof. Unfortunately, the church did not have a sinking fund to replace the roof, forcing us to dip into the emergency fund. Anyone who has ever had to dip into their emergency fund knows the only thing worse than using the emergency fund is having to replenish it! But this story isn’t about sinking funds, emergency funds, membrane roofs, deferred maintenance, or any of the other issues surrounding the roof – it’s about the importance of a church budget.
I started my full-time ministry career in 2006 and didn’t know anything about church budgets. To complicate matters, the church was experiencing a split, and the congregation was shrinking, as were the donations. While I didn’t know much, I knew that if the church kept spending more than the donations coming in, a financial disaster was on the horizon. The only way to prevent that from happening was through a realistic, zero-based budget based on historical attendance, giving, and spending using the current trends as an adjusting factor. Over the years, I’ve learned a lot (and I still have a lot more to learn), and I want to pass this knowledge along to others who might be where I was all those years ago.
Making A Budget Takes Time and Practice
Building a church budget doesn’t happen overnight. In fact, the longer you do it, the more you realize how long it takes. I allow about five months for our church to build the budget. Start the budget season by developing the goals for the upcoming fiscal year and casting that vision to the various teams (ministry and operations) to allow them to dream and estimate the cost of those dreams. Remember, these goals must be rooted in the church’s mission and vision. Next, project the income for the upcoming fiscal year. Projecting the income may be the most important step of the budget – a projection that is too low can limit the church’s impact, and projecting too high could create a catastrophic cash flow situation. Next, reconcile the submitted budgets to the projection and work with the key stakeholders to either raise or reduce the submitted budgets. Once the numbers are aligned, share the budget. It’s not supposed to be a secret document. A church budget documents all the amazing ways the church plans to use the financial resources provided to accomplish the mission God gave the church.
Understand Healthy Church Metrics
When I compare myself to others, I find myself either proud (which is pretty rare) or insecure. Using church metrics isn’t that kind of comparison. It’s more like blood pressure – there are healthy ranges, and it’s wise to remain within them. For example, how much should the church budget for compensation? How much is too much for facility expenses? Determining healthy church budget percentages baffled me so much at first that I worked with a friend to publish a book to walk churches through the process.
Have An Emergency Fund
If you’re familiar with Dave Ramsey, you know that baby step 3 is to build a fully funded emergency fund of three to six months’ worth of expenses. This is great for personal finances, but it may not make sense for a church to build an emergency fund that big. A more realistic amount falls somewhere between 40 and 80 days worth of expenses. For example, if a church has average monthly expenses of $50,000, it would range from $67,000 to $133,000. Churches without an adequate emergency fund must add a line item to their budget to build one ASAP.
Develop Sinking Funds
A sinking fund is not an emergency fund; it protects the emergency fund. A sinking fund saves money for significant upcoming purchases – like replacing a roof. For example, a roof has an average life span of 10-15 years. A sinking fund is a way to save up for the cost of the new roof before it requires replacement. Churches with enough financial resources should build sinking funds for major expenses such as a roof, sound system, carpet, HVAC units, etc.
Building a church budget is essential to accomplishing the mission regardless of the church’s size, location, or income. For those new to their role in ministry, remember that the budget takes time and practice to build. It helps to know healthy church metrics to determine if the church is overspending or underspending in budget categories. Churches without an emergency fund must prioritize a line item to build one in the budget. And when able, build sinking funds to prepare for large ticket items and preserve the emergency for – well, emergencies.
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