Creating a budget is needed for churches to reach their goal and grow as a community, but it isn’t as easy as it seems. It is a big task that requires lots of reviews, planning, and monitoring.
In this blog post, we’re going to talk through why you need a budget how to create a budget, and we’ll share a free downloadable budget guide to assist you.
Why Do You Need A Church Budget?
Here are five reasons why your church needs a budget:
It aids planning
Let’s say your church has a goal of renovation and expanding the church’s surroundings. This goal would require funding and a budget process. The budgeting process will aid planning to provide a structured strategy for funding the church’s financial goals.
It gives freedom
A church budget gives freedom to you and the church.
- Every church needs a plan. Without a budget, you cannot plan and ensure ministry objectives are met nor have control over how much you spend.
- Budgets allow a layer of accountability to meet budget requirements as recommended.
- It takes a plan supported by budget dollars to achieve church-wide initiatives. A plan and set goals provide a structured process and help allocate resources to church priorities.
It protects essential ministries.
Without a church budget, the church may spend money on things that aren’t important and not have enough money for essential tasks. Having a set budget for your church would help you determine the most important and least important program and church initiatives to focus on the crucial tasks before the least important ones.
Following a budget helps hold churches accountable to their congregations and allows them to follow their mission of expanding the church, reaching more people, and spreading God’s word.
Types Of Church Budgets
There are different approaches to church budgeting. No church is the same, and budgeting is not a one-size-fits-all approach. Below is a list of budget approaches for churches:
- Zero-based budgeting. Zero-based budgeting (ZBB) is a budgeting approach that involves developing a new budget every year from zero. It involves analyzing every line item of the cash flow statement and justifying all the expenses your church will incur. Zero-based budgeting aims to avoid costs that are not essential to the church’s growth and planning for longer-term initiatives.
- Line-item budgeting. If your church already has a budget that works, this type of budget works best. This budget takes the church’s previous year’s figures and adds or subtracts a percentage to obtain the current year’s budget.
- Program budgeting. This budget approach is used for church projects or programs. If your church goes with this budgeting approach, you will need to define the need for each program and the expenses related to that program.
How to Create a Church Budget
Identify Church Goals
An effective budget starts with identifying your church’s goals. Knowing your church’s goals for the year will help plan how to create a church budget for expenses and income. Here are three steps on how to identify your church’s purpose:
Meet with the church’s team to discuss and pray about the church’s year goals and visions. Ask questions like:
- What is God’s plan for our church this year?
- Where is the greatest need in our community?
- What areas of ministry do we want to expand this year?
- What mission(s) do we want to commit to this year?
- What do we need to fund to prepare for our long-term goals?
- What are our income goals? How can we encourage members to give more to the church?
Share your goals with the church members, then ask their opinions on what else they would love to prioritize this year. Do they want to do more outreach, invest in the community or expand the ministry? Involving the members will increase the chance of meeting the church’s goals and visions.
Meet with the church team again to create a plan to accomplish the vision and strategic plan. To ensure all spending decisions are made according to the church’s combined strategies and goals, costs and funding are needed to achieve your church’s goals and incorporate them into the budget.
Access Previous Data
Analyze the previous year’s financial data to find patterns in expenses and income. Here are some questions you can ask to help you analyze the church’s financial data:
- How much does the average member give to the church?
- Does your church have emergency funds?
- How much is the church spending on facilities/equipment, personnel, and administration?
- Does your church pay all expenses on time?
- Does your church have recurring donations that you can rely on to even out fluctuations in giving and attendance?
Review Current Expenses
After you’ve accessed your prior years’ data, the next thing you need to do is review current expenses. Learning how much money is currently being spent is the first step to establishing how money needs to be spent going forward. Reviewing your costs will also help you identify waste and unnecessary expenses.
Make Budget Cuts
Not all expenses should make the final budget. Access your data and look for areas that need to be edited and cut out of the budget. Here are some questions to help find expenses that shouldn’t make it to the final budget:
- Are there ministries in your church that are non-essential?
- Are there duplicate resources across ministries in your church? If yes, you might need to cut the unnecessary expenses.
- Is your church in money trouble? If yes, you might need to make several budget cuts.
- Is there any way to increase income via general giving, so you don’t have to make so many budget cuts?
- Is any of the budget cuts going to affect the church’s goal?
Plan For How Church Growth May Impact The Budget
Church growth is inevitable, so you need to consider growth while creating your budget. What happens when your church outgrows its original budget? You need to prepare for how your budget will change if your church grows. Here are some questions to help with the preparation:
- Does your church want to invest in church technologies (live streaming tools, church website, and custom mobile app) to help make worship easier for you and the members?
- If your church got 100 new members, will space be enough, or would you need to expand or relocate to a bigger building?
- Will your church need to hire extra staff or pastors soon?
- Can there be any improvements to how donations are accepted to make it easier and faster for the members?
Hire An Accountant
Hire an accountant to help keep the church accountable and monitor the budget while ensuring your financial records are accurate. They can provide your current budget that reflects your current situation so you can allocate limited resources to needed programs and initiatives. Creating a budget is one thing; it’s another to watch the budget and stay accountable. Make it a routine to have regular financial conversions with your accountant and the team so you can identify parts of the budget that need adjustment throughout the year.
Share Your Finished Budget With The Church
Share the final budget with your church members. Financial transparency will show the members that the church leaders can handle the resources entrusted to them.
Monitor The Church Budget Performance
It doesn’t just end at creating a budget and sharing it with the church – the budget has to be monitored to ensure your income and expenses align with your projections. You don’t have to check the budget every day – dedicate a period where you’ll check in on the budget’s performance, then create meeting times and calendar reminders for the task.
Ready to get started with your church budget? Download for free:
- Church budget templates
- Mistakes to avoid when creating a church budget
- Budgeting tips from professionals, and so much more!