If you have ever stepped foot on a golf course, you know there are rules that govern the game. For beginners, it feels like there are a lot of rules, but the truth is there are not that many. In 1744 there were 13 rules established for the game of golf, and currently, there are no more than 34 rules. That’s it. Not bad for a game that can last 4-6 hours. Games need rules. Rules set limits and create parameters in an attempt to constrain behavior. But creating a church budget is not a game. Budgeting doesn’t require rules but, it helps to have guidelines. Guidelines give general direction and help set a course of action. As your church prepares for the next budgeting season, consider these guidelines as a way to provide a general direction and set the course of action.
Forbes contributor Dennis Jaffe says that “trust makes people feel eager to be part of a relationship or group, with a shared purpose and a willingness to depend on each other.” Creating a church budget in a silo is the quickest way to lose trust with the staff and, ultimately, the congregation. Assemble a team that includes the CFO, not the lead or senior pastor, qualified board members, and qualified laity. (Laity is a churchy word for someone not in full-time vocational ministry). In addition to a finance team, it is vital to keep the senior pastor, the entire board, and all ministry leaders involved throughout the process. Building a church budget with a team goes a long way in building trust and demonstrates stewardship.
If you have ever watched Shark Tank, you understand that most people overvalue their business. A start-up company with $100,000 in sales over the last three years is not worth $10 billion. At least not yet. In the same way, do not overestimate the donations to fit the spending your church desires. Create a realistic budget target based on actual income over the last 12 months using attendance to determine the growth or reduction rate. Increasing the budget mid-year is a far better scenario than reducing ministry or staff mid-year.
Calculating actual compensation, facility, and operating costs are tedious and may expose an imbalance in your church budget. Do the hard work upfront and determine if your church’s expense percentages align with healthy churches. Underestimating actual costs to protect staffing levels or increase other budget areas can quickly erode confidence.
When it comes to determining budget categories, also known as the chart of accounts, simple is usually better. Include core budget categories such as income (offerings/donations), compensation, facilities, operations, and ministries. Within each of those core categories, the level of detail you need for reporting will determine the number of sub-categories. Albert Einstien is attributed the quote, “Everything should be as simple as it can be, but not simpler.” Strive for that goal as it references completeness and accuracy. That is what you are after.
Sharing the church budget with the congregation is a great way to build and maintain trust. It demonstrates transparency and accountability in an area often associated with distrust and scandal. Being open and honest about the budget may lead to questions. Welcome them. It shows interest and provides an opportunity to show how the donations of the church are funding the mission, vision, and values of the church. A word of caution; not everything in the budget should be shared. For example, instead of providing individual income or missionary support, present a summary that states a subtotal of all compensation or missionary support. This approach demonstrates openness without violating privacy.
Be collaborative, create a realistic target, including all costs, use a simple chart of accounts, and share the results. Use these guidelines when creating your next church budget to help direct the course of action, and keep your church moving toward the future.