It’s that time of year again when churches typically prepare (and should) a budget for the next year. Creating a budget for your church doesn’t have to be complicated. Below are a few steps and questions to help you prepare your budget:
- Revisit your vision and plan for achieving your goals. Estimate the costs associated with any new plans not already accounted for in your current budget. An effective budget starts with your church’s vision.
- Prepare a current-year forecast for each income and expense line on your income statement. You can create projections using monthly averages for bills paid on a monthly basis. For other line items, you will need to use judgment to prepare the forecast.
- Review annual projected expenses. Knowing exactly how much is being spent on each type of expense is the first step to establishing how your funds may be used in the coming year. Taking a close look at expenses will help you identify potential misuse of funds and unnecessary expenditures.
- Budget for next year’s income and expenses. You can now estimate income and expenses using your current year forecast along with incorporating costs for any new plans being implemented. For some items estimating will be fairly straightforward. For example, utility costs may just need to be adjusted for inflation; insurance premiums will be provided by the insurance carrier. Other items will require more input. For example, to forecast income you may want to consider annual trends in your giving, any changing economic conditions, and changes to church membership. Estimating some budget items will be more of an art than science.
- Don’t forget cash reserves. It’s important to build cash reserves for emergency needs that arise or to have them on hand for future investments. A good rule of thumb is to have enough cash reserves to cover 6-9 months of expenses.
- Monitor. Implement monthly reporting to track how closely actual income and expenses fell in line with your projections.
When it comes time to share the budget with church members it is important to share the numbers, but it is also a good time to remind members of the importance of giving and how their gifts are used in the ministry. Share examples of how giving has enabled the church to achieve its mission. Remind members of the various ways the church accepts gifts.
Please feel free to contact me for assistance, and Happy Budgeting!