How to Create a Healthy Church Budget

Written by Raul Rivera on Dec 06, 2016 in Church Management

For many pastors, the thought of creating a church budget can seem like a daunting task to complete. As a result there are many church budgets that are suffering from lack of attention.

The reality is that money and resources matter in order to operate your church and fulfill the vision that God has given you. In fact, your church’s success in carrying out its vision can be directly related to how well you manage and steward your church’s finances.

In this post, I am going to address how to easily create a healthy church budget. First, let us look at several reasons church budgets are necessary.

Why budgets are necessary

Typically, all is well so long as things are going smooth and the bank account is not in the negative. Given that, is it necessary for your church to operate on a budget? My assumption is that you would respond, “Yes!” Have you considered why this is true?

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Here are some key reasons why a budget is necessary.

1. Budgets identify where you are now and where you are going.

Establishing a budget creates a picture of how much money your church receives and how the money has been and will be spent. Based on a budget, you can see if your finances are being appropriately used to meet the goals for your church.

For instance, are you planning to rent a larger facility for a new location? If so, are you saving your church funds in a way that will prepare for a down payment, new furnishings, and equipment?

(Recommended reading: "5 Things Your Church Needs to Know About Leases")

2. It provides protection for the board of directors.

Having a budget is a “frontline defense” in proving that the board of directors is operating in the best interest of the corporation. Tax-exempt organizations operate exclusively for the benefit of the public and not the private benefit of individuals. Having a budget shows numerically that the organization is operating for the good of the public rather than the private interests of its board members.

For example, suppose a pastor receives a salary of $100,000. Outside of a budget, you may question if the church can support such a salary. However, if the church has a well-planned budget that clearly indicates an annual income of $500,000, with the majority of the budget dedicated to facilities maintenance, children’s ministry, and outreaches to the community, then the pastor’s salary is likely reasonable.

(Recommended reading: "Do You Know How to Take Board Meeting Minutes?")

3. It helps display weak areas of fiscal administration.

Creating a budget helps to reveal areas where the church finances have been mismanaged, which can range from incorrect use of a petty cash fund to extra-budgetary purchases made without the board’s approval.

Your church’s success can be directly related to how well you manage and steward your church finances.

Additionally, any staff members with access to church funds should be required on a regular basis to provide paperwork noting what was purchased and why. Doing so helps maintain accountability and ensures that everyone is sticking to the planned budget.

(Recommended reading: "How to Develop Effective Leaders in Your Church")

Next, we will look at how to complete a church budget.

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How to create a budget

It may seem like a giant task is at hand to predict the outcome of next year, but it does not have to be an ordeal. Below are some simple steps to creating a budget that will help your ministry flourish in the upcoming year.

  1. Begin planning early. The ideal time to start creating a budget is a few months before the end of the year, which gives you plenty of time to get the job done. However, if you have not yet done so, then it is not too late to begin today.
  2. Obtain a realistic idea of the income you expect. This income is your guide to figure out how and when your financial goals can be reached.
  3. Determine your financial responsibilities. What expenses must you have to function? Allocate funds in that area first.
  4. Identify your church’s financial goals. Then determine where you should save and fundraise to meet those goals.
  5. Create a “buy-in” to the budget. A budget is necessary, but keeping one operating long term and setting up the right procedures to carry it out takes commitment. Be sure that the entire board has a chance to review the budget and share any concerns.
  6. Make a team plan for inner-office management of expenditures. Use the necessary forms to track who spends what, when, where, and why, to be sure that regular accountability is maintained regarding the use of church funds. Create a contingency plan for emergency expenses outside of the budget.

(Recommended reading: "6 Church Fundraising Ideas That Work")

Sticking to your church budget

It is one thing to create a budget for your church, but it is another thing to follow the budget that you create. For the first few weeks and months of a new year it may seem easy to adhere to the budget that you previously created.

A budget is a “frontline defense” in proving that the board is operating in the best interest of the church.

We typically begin a new year strong; however, it is important to remember that you are running a marathon and not a sprint. Therefore, what can you do to help ensure that you stick to the budget created for your church?

Many church leaders that have signed up for our Bookkeeping Service understand that keeping accurate financial records is one of the keys to sticking to a church budget.

If you have never considered the importance of bookkeeping for your church, then below are a few things to note:

1. Bookkeeping helps you to better understand how your church functions.

  • You can see how, where, and when money is spent, as well as the role of those expenses in your organization.

2. Bookkeeping helps you to know what needs to be changed, adjusted, or kept the same with your church finances.

  • You will be able to see what worked well for your ministry.
  • You will be able to adapt your habits and procedures to prevent unnecessary spending.
  • You will be able to pinpoint the necessary changes for your new budget.

Sowing for the new year

The Bible tells us in 2 Corinthians 9:6 that “whoever sows generously will also reap generously.” When you begin sowing good practices into the finances of your church, then you will begin to reap healthy church finances. The first step to doing so begins with you.

We recently received an email from one of our bookkeeping clients that read, “I would like to thank you guys for taking yet another burden off my shoulders. To know that I have someone who is looking out for our ministry’s financial health is so comforting.”

Are you also interested in having us look out for your ministry’s financial health? If yes, then I encourage you to take advantage of our Bookkeeping Service. This service provides your church with a personal bookkeeper that will help your church to maintain accurate financial records, monthly reports, etc. so that you can stick to the budget you create.

For more information on how this service can benefit you and your church, give us a call at 877-494-4655, or simply click on the link provided below.

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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.

Blessings,
Raul Rivera


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