Session 101 of Church Budgeting blasted the myth that budgets are restrictive and faithless by showing that the first step in crafting a church budget requires seeking God’s direction for the upcoming year. Then, after sharing the focus and goals with the church’s leaders, a good process allows time to prayerfully consider how to accomplish it and determine the necessary financial resources. Since the working definition of a church budget is a cash flow plan to maximize the finances God entrusted to the church to accomplish the mission, it’s time the rubber hits the road. A cash flow budget requires projecting both sides of the accounting ledger: income and expenses. This session covers the basic steps to project income. But first, a quick overview of the types of budgets.
Determine the Type of Budget
There are at least three primary types of budgets a church can use, a line item, a value proposition, or a zero-based one. All three have merit and appropriate use, meaning each church should determine which budget type works best for their church. I agree with the Evangelical Council for Financial Accountability (ECFA) recommendation to use a zero-based budget. Using a zero-based budget means starting each fiscal year at zero instead of copying and pasting the prior year’s budget. A zero-based budget will take longer, but the benefits outweigh the time investment.
Build the Income Projection
Creating an accurate income projection for the upcoming year is foundational to the church budget. Building the budget target, or income projection, is not a wish or a random number manufactured to support the church’s expenses; it’s rooted in the reality of a mathematical formula. Projecting too much can put the church in a cash flow crisis, and projecting too little limits the amount of ministry the church can plan.
When determining the budget income target, the church needs two data points from at least the last 12 months: attendance and giving. Using at least 12 months of data, follow these four steps to create the budget projection.
Adult Attendance: It’s vital to take an accurate count for each service (in person and online). Do not include children’s or student ministry in the count. Use adult attendance only when projecting the income target. Use a spreadsheet to list each month and the corresponding adult attendance. Calculate the sum of the adult attendance.
Here’s an example:
| Month | On Campus | Online | Total |
| Oct. | 2,150 | 300 | 2,450 |
| Nov. | 2,270 | 325 | 2,595 |
| Dec | 2,850 | 350 | 3,200 |
| Jan | 2,090 | 310 | 2,400 |
| Feb | 2,100 | 275 | 2,375 |
| Mar | 2,325 | 290 | 2,615 |
| Apr | 2,250 | 250 | 2,500 |
| May | 2,275 | 300 | 2,575 |
| Jun | 2,150 | 295 | 2,445 |
| Jul | 2,175 | 280 | 2,455 |
| Aug | 2,200 | 310 | 2,510 |
| Sep | 2,225 | 280 | 2,505 |
| Total | 27,060 | 3,565 | 30,625 |
Giving: Record the giving using the same method as attendance. Do not include rental income, bookstore, or coffee house sales. Calculate the sum of the giving.
Here’s an example:
| Month | Service 1 | Service 2 | Special | Total |
| Oct. | $45,000.00 | $55,000.00 | $100,000.00 | |
| Nov. | $50,000.00 | $60,000.00 | $110,000.00 | |
| Dec | $50,000.00 | $65,000.00 | $75,000.00 | $190,000.00 |
| Jan | $40,000.00 | $40,000.00 | $80,000.00 | |
| Feb | $40,500.00 | $45,000.00 | $85,500.00 | |
| Mar | $55,000.00 | $55,750.00 | $110,750.00 | |
| Apr | $45,750.00 | $55,250.00 | $101,000.00 | |
| May | $45,000.00 | $50,000.00 | $95,000.00 | |
| Jun | $40,000.00 | $35,750.00 | $75,750.00 | |
| Jul | $37,750.00 | $36,000.00 | $73,750.00 | |
| Aug | $40,000.00 | $37,750.00 | $77,750.00 | |
| Sep | $42,500.00 | $50,500.00 | $93,000.00 | |
| Total | $531,500.00 | $586,000.00 | $75,000.00 | $1,192,500.00 |
Growth (or Reduction) Rate: Use the monthly attendance data, calculate the difference between the prior month and average the percentages. Here’s an example:
| Month | Total | |
| Oct. | 2,450 | |
| Nov. | 2,595 | 5.59% |
| Dec | 3,200 | 18.91% |
| Jan | 2,400 | -33.33% |
| Feb | 2,375 | -1.05% |
| Mar | 2,615 | 9.18% |
| Apr | 2,500 | -4.60% |
| May | 2,575 | 2.91% |
| Jun | 2,445 | -5.32% |
| Jul | 2,455 | 0.41% |
| Aug | 2,510 | 2.19% |
| Sep | 2,505 | -0.20% |
| Total | -5.32% |
Project the Income: Use the sum of the offering for the last twelve months, multiply it by the growth or reduction factor and add or subtract that number from the twelve-month offering total. Here’s an example:
Twelve-month total of giving = $1,192,500
Growth/Reduction factor = -5.32%
Reduction amount = -$63,436
Budget Target = $1,129,064
Caution: While it may be evident to some, circumstances can skew the growth/reduction factor. This formula is a guide, not an absolute. If your church is in a recent trend of growth in attendance and giving, but prior months weigh the formula negatively, make the adjustment.
Now that the income side of the ledge is complete, it’s time to start allocating the resource to fund the ministry. Session 103 is all about how to create expense projections.
