How to Create a Budget for Your Ministry

Written by Allan Armitt on Mar 03, 2020 in Finance Management

As we get ever closer to spring, we all seem to naturally think about getting things clean, fresh, and new. Once we move past the new year plans, we get some breathing room and can begin to consider what it would take to get our house in order. If you don't already have one, this is also a great time to make sure your ministry has a budget in place.

That's right - a budget. I know for many, this can be a daunting task. Still, it's essential for any ministry to steward its resources well. There are numerous examples in the Bible that admonish us to be good stewards of our resources. Jesus himself even uses a parable about budgeting to liken it to the cost of discipleship in Luke 14:28. Jesus' words show that it is critical to count the cost before we begin building something new.

Stewardship is the work of supervising or taking care of something. Being a "good steward" means that you are managing to the best of your ability. We know that in Haggai, the Lord tells us that the silver and gold belong to him, but we are required to steward those resources that he has allowed us to oversee. Budgeting is the task of looking forward to how those resources may be used or needed and making sure it aligns with the purposes of God for your ministry.

For compliance, a budget is also critical to protect your leadership team and Board of Directors. The tax exemption your church or ministry gets is because it is operated exclusively for public benefits. And it can lose that status or face other penalties if it uses its resources to benefit (or inure) any individual or family instead of the public. A budget helps to show that your board of directors have done their due diligence to make sure no funds have been misused or gone to any purpose that is outside the ministry's vision.

"But I don't know where to start"

Many ministries get stuck before they even take the first step. The fear of starting something new, especially something you don't know a lot about, can be crippling. Whether your ministry has been around for 200 years, or you're planning to launch in 2022, the first step of a successful budget is knowing your vision. 

Your budget needs to be aligned with your vision to make sure the resources you are spending today are taking you toward your vision for tomorrow. While many pastors and ministry leaders struggle with budgeting, I'm guessing you LOVE talking about vision. Making sure your budgeting process is centered around the vision for your ministry can breathe life into an otherwise frustrating process.

From there, understanding a realistic, high-level picture of your income and expenses is a great next step that will help you identify any glaring misalignments between your financial administration and your ministry's vision. 

Don't be afraid of finding problems! The budget for your ministry is a tool to help identify problems and give your leadership team or board of directors the information they need to solve them.

Creating categories

Breaking your income and expenses into a few large categories lets you know which of those categories need more attention, so you can maximize your time spent working on budgeting. Many churches and ministries have few sources of income (usually donations), but knowing these sources and keeping track of them will help you understand a few questions that get asked all the time:

  1. Are we growing?
  2. Can we spend that?
  3. What can we do to make up for ______?

While some ministries rely only on donations, others have found creative ways to support their mission. Conferences and registrations, bookstores, investments, grants, or even businesses owned by the church are some of the ways the churches we work with help grow their resources.

For expenses, each ministry can have a different variety of expenses, but we've found that most expenses fall into one of five high-level categories for most ministries:

  • Personnel
  • Facilities
  • Administrative costs
  • Ministries
  • Outreach

By starting with a consolidated list of categories, like the one above, you can know at a glance where most of your spending is going and make adjustments where it doesn't align with your ministry's vision.

For example, if you see your administrative costs are taking a huge portion of your expenses each month, you can use that insight to investigate what is causing those costs to keep rising. Maybe some recurring fees or new equipment you thought you needed, but aren't actually using. By looking into the right places, you can maximize your time with problem-solving instead of math - and that's where good stewardship really thrives.

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Looking forward

Once you've got an idea of the categories you want to use, and you know the vision you want your budget to help you reach, then you're most of the way to having a tool that will help you plan for the future. 

When trying to predict the future, the best place to start is the things that are the most unlikely to change. Things like your lease or mortgage and the costs to use them, insurance, the salaries of your key staff, the ministry costs of running your core ministries - those all tend to be very predictable for most ministries. These can also be considered static, or unchanging, costs.

What can be more difficult to predict are the things that you have much more control over. Office supplies, travel, advertising, marketing materials, gifts, or other miscellaneous expenses can change regularly. While every year is different, if you're armed with the knowledge of what those expenses have been in the past, you can really speed up the process of planning for them in the future. This is where good recordkeeping can save you hours!

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What about surprise expenses?

One of the most frustrating facts about budgeting is that you're never going to be 100% right. There will always be something new that comes up, or something that changes and you're going to have to react to it. This is where many of those questions mentioned earlier appear, and you'll have to revisit your budgeting process. But the good news is that you don't have to start over! If your budget is aligned to your vision, and you know what is NOT changing, then responding to what IS changing is much simpler.

One of the tools that many ministries use the 90 percent rule - which is a way of underestimating your income to build in a buffer for change. The concept is simple. Assume your donations are only going to be 90 percent of what you brought in the previous month or year. If your ministry is growing, this gives you peace of mind to make decisions even in the midst of surprises.

Another budgeting idea that many ministries implement is an emergency fund. It's a wise practice in a household, in a business, or even in a ministry to make sure to plan for the extreme. Putting away one to three months’ worth of expenses into an emergency fund can get you through what would otherwise be a difficult season without being overwhelmed by stress.

“I can't do this alone!”

One of the keys to keeping your budget useful is doing it as a team. If you've taken the steps above to align your spending to your vision and categorize your income and expenses into high-level groups, then adding a discussion about your budget into regular meetings can be easy. Getting buy-in from your entire board and leadership team helps everyone stay accountable for what you are stewarding together. The Lord hasn't called you to run your ministry alone, so make sure your team all have buy-in.

Another benefit of bringing your entire team into the budgeting process is how it works day-to-day. In our other blogs, we've talked about having standard forms for reimbursements, credit card expenses, and larger purchases, all of which require everyone to work together to implement. When your ministry maintains accountability and clarity around its spending, then you will see that culture of accountability spread through your entire staff.

If you have questions about creating a budget, or how to keep track of managing donations, please give us a call at 877-494-4655, or click the button below to have a specliast call you. I encourage you to ask about our bookkeeping service and donation tracking software to learn how StartCHURCH can serve your needs.

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Please feel free to comment. We always appreciate good dialogue. However, we do moderate each comment to ensure that it is on topic and not derogatory to other participants. We ask that you keep your comments brief and pertinent to the topic so that others may benefit.

Raul Rivera

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