God blesses churches with tithing members to provide the resources to do the work of the ministry. Being Good stewards of those resources is a significant responsibility – that should not be taken lightly.
Churches use operating budgets to plan and control spending.
Consequently, creating a budgeting process can help to ensure that dollars are allocated to those things that help fulfill the church mission and vision.
Unfortunately, there are a surprising number of organizations that don’t operate with a budget because of the perceived value of taking the time to prepare and monitor it.
Budgets are used for both planning and control. Planning requires high level decisions about priorities that line up with strategy, while controlling ensures that management implements what was planned and achieves objectives.
Planning is futile without control over spending, and without planning, there are no targeted objectives to achieve.
Budgets set targets for revenues and spending, and establishes a plan for how the church will achieve its short and long term strategy.
The budgeting process makes estimates of revenues, plans expenditures, and restricts spending that is not part of the plan.
Operating budgets extend out for one year and are divided into four quarters. The quarters are then divided into months and the budget review of gains, losses and variances is done on a monthly basis.
Budget allocation is based on historical performance and church priorities. Budget expenses are organized and controlled by the different levels of management.
Manager performance is based on how well their department budget is controlled. Managers are held accountable for variances between the budget and actual results.
The Budgeting Process
The budget review committee or church board establishes the global budget with revenue projections and allocates dollars to individual departments. The individual department managers are responsible for creating their own budget need estimates based on goals and allocated resources.
Allowing individual department managers to prepare their own budget estimates makes them more accountable, accurate and reliable. The advantage to this approach is the working manager is more apt to follow their own budget because they created it and understand the reasoning behind it as opposed to a budget handed down to them from above.
This adds a layer of accountability in that the manager can blame no one but themselves if they fail to meet budget requirements that they recommended.
Once these departmental budgets are prepared, they are submitted to the next level of management for review and approval.
Top management sets strategy and goals, then managers and supervisors estimate budget requirements needed to accomplish strategy. The budget is established and sent back up the ladder for review and is negotiated back and forth until a final budget is approved.
Common Manager Concerns
Department managers are often caught in the middle and express some common concerns with budgets:
- If I don’t spend all the budgeted dollars this year will I lose it next year? For example, facilities has $10,000 budgeted for snow removal but only used $7,500 because of a mild winter, should facilities be given $10,000 for the budget next year?
- If I overspend my budget will it be reflected on my performance appraisal? For example, a severe winter caused snow removal budget to be overspent by $15,000, is the facilities manager responsible for this variance?
- I don’t want budget restraints to impact employees, customers or improvement efforts. For example, if the scanning system for children’s ministry check-in breaks and there are no dollars in the budget to replace it, the employees and parent experience would be affected. Is this an acceptable variance?
- If there is too much focus on budget control it can take the focus off of non-financial goals and targets. For example, if the children’s ministry manager is more concerned with controlling spending than making sure her department meets the needs of the parents (customer) the priority to have a positive customer response from parents may be challenged – there needs to be a balance.
6 Reasons to Develop a Church Budget
- Achieving objectives does not happen by accident. It takes a plan, supported by budget dollars, to achieve strategy.
- The budgeting process forces churches to plan and set goals which provides a structured process for funding church-wide initiatives.
- When goals and objectives are budgeted, they can be used as tools to evaluate employee performance.
- Budgeting helps to facilitate strategic plan implementation by allocating resources to church priorities.
- Budgeting eliminates turf wars over spending and available resources.
- Budgeting improves communication throughout the organization because everyone understands what the priorities are and what resources are allocated to them.
As with most things in managing a church, budgeting needs to support the vision and strategic plan.
Churches that stay focused on their strategy and plan, know exactly where they want to spend their resources. This plan helps to keep them from spending in areas that do not line up with the vision.
For example does spending $100,000 on new sound system for the church auditorium line up with church strategy? How would your church answer this question?
Managers face spending decisions every day. And, unless decision making is based on budgeted dollars, it can be easy to overspend ministry resources.
Managing a budget is a skill that all managers can learn and develop. Part of that development is having a good understanding of church priorities so that all spending decisions are made in accordance with the vision and strategic plan.