How a Budget Protects Your Church
By Kevin Camon
4 Minute Read
Pastor Michael attended his ministry's Q1 board meeting to review the previous year's budget. Silence filled the room as the board members flipped through the numbers from 2020. With a grim look on her face, the secretary spoke up,
"If we don't adjust our new year's budget, we will sink like a battleship."
Pastor Michael felt a sinking feeling within him.
He never thought they'd be having to decide between keeping the lights on over growing the ministry.
They all knew a change needed to be made—and fast.
Continue reading to learn what happened next.
Finding a Solution
"We need an expert to help us on this one, Carol," Michael said to the secretary. "We don't know what we don't know. We can't fix this on our own."
That's when the team decided to seek a bookkeeper's assistance—but not just any bookkeeper. They needed someone who had experience handling church and ministry finances.
Have you ever been in Pastor Michael's position? Maybe you are currently looking at your ministry's finances, wondering how you can possibly fulfill all God has for you to do in the new year. With the help of a ministry-minded bookkeeper, you can go from stressful nights of worrying if you'll have to close your doors to peaceful sleep knowing you are stewarding your finances well.
Before we share the tools in this blog, we want you to know we have a solution for you. Our ministry-minded bookkeepers will help you succeed with your finances in the new year. Please reach out to us at 877-494-4655 or visit the link below to connect with us on your schedule.
The following information in this blog provides the tools Pastor Michael and his team used to transform their financial situation to continue their mission and protect their church.
Budget for growth
The way we spend our money matters to God. It doesn't matter if it's our personal finances or our ministry's finances; God cares about how we steward the money He has given to us.
Your ministry's success in carrying out its vision is directly related to how well you manage and steward your church's finances.
By creating a budget and sticking to it, you strategically use your finances to help your ministry grow. And, you will meet your financial goals much sooner than you expected.
"Why do I need a budget?"
A. It's your financial GPS.
Establishing a budget lets you know where your ministry stands and where it's heading. A budget tells us how much money is coming into the ministry and how much will be spent. With a budget in place, you can see if your finances are being appropriately used according to your ministry's mission and goals.
Let's say you're planning to rent a larger facility for your church. You'll need to save your funds for a down payment, new furnishings, and new equipment. If you have a budget in place, you can better estimate exactly how long you'll need to save up for a bigger location.
B: It's a shield for your board of directors.
A budget protects your board members. It shows the board of directors is operating in the best interest of the nonprofit organization. Churches and other nonprofits are tax-exempt because they run for public benefit alone. They are not for the private gain of individuals. Having a budget on paper provides proof that the board members are not using the ministry's income for their personal interests but for the good of the public.
Let's say a church's annual income is $500,000 and the pastor receives a salary of $100,000. You may wonder, can this church can support that kind of compensation? But let's also say this church has a well-planned budget in place. And most of the funds go to facilities, children's ministry, and outreaches. Suddenly, it makes sense that the pastor could have this kind of salary.
C. It exposes weak areas of financial administration.
Setting a budget in place helps your staff see areas where you may have missed the mark in managing the ministry's finances. These areas can range from incorrect management of a petty cash fund to extra-budgetary purchases made without the board's approval.
Also, staff members with access to your organization's funds should be required regularly to provide paperwork noting their purchases and why their purchases were made. This should be standard policy for all purchases using the ministry's bank account. By doing so, you and your staff maintain accountability and make sure everyone sticks to the planned budget.
Take a look at a few ways you can maximize your end-of-year budget planning.
1. Review the Previous Year's Budget
If you did your homework last year and created a budget for 2020, use it as a template to start planning for 2021. Review your budget allocations and compare them to your actual expenses to see what you got right and where you went wrong.
From there, you can add in any new expenses, remove old ones, review your current cash flow and projections for the coming year, and start crafting a budget that's even more effective than the one before.
2. Focus on Building an Emergency Fund
Building a "rainy day" fund should be a top priority for churches and ministries (especially new ones), but this part of budgeting flies under the radar too often. This cash stash may help you get through attendance droughts or help you avoid taking out a loan when disaster strikes.
3. Review Your Budget Monthly
Budgets are never once-and-done documents. If you wait until the year's end before comparing your budget to your expenses, you're already behind the curve. This way, you always know where your money is going, where you need to make cuts, and where you can afford to spend more to help your ministry's growth.
4. Lower Your Fixed Costs
You can't predict worst-case scenarios or wildcard expenses, so focus on what you can control (usually your fixed costs). For example, you may be able to find a cheaper internet service provider that gives you a discount with a new contract. Focus on creating a plan the will allow you to run and maintain your ministry on a one-fixed cost that includes utilities, internet, furniture, maintenance, printing, and all the other little expenses that can eat into your budget.
Look at all expenses from the previous year and find ways to trim unnecessary costs to increase what's leftover for the month. For example, suppose you find that your ministry meetings are held at various restaurants each month. In that case, you may want to consider having those meetings where you hold your services or ministry operations and provide food for the meeting.
5. Make a plan for inner-office management of purchases.
Ensure your team uses the necessary forms to track who spends what, when, where, and why. Again, this creates regular accountability regarding the use of the ministry's funds. It's also a good idea to make a contingency plan for emergency expenses outside of the budget. Be sure that every department is aware of the protocol.
Ready, set, BUDGET!
When you take the time to create a budget, you'll see financial growth in your ministry. It's the first step in managing your organization's finances. Though it may seem restrictive, preparing a budget and sticking to it will bring you freedom.
Whether you're running a church, ministry, or another nonprofit, you need a budget. Creating a budget is essential for your ministry's function and growth, and having the right team in place will make a world of difference.
To learn more about how we can help you maximize your budget and protect your organization, please give us a call at 877-494-4655 or click the link below to schedule a call with a specialist.