Why Budgeting Is the Best Tool for Your Church's Growth
By Tracey Perez
Budgeting is a word that often provokes intimidation and dread in the hearts of pastors. But I'm here to tell you that you don't have to be afraid of it. Budgeting becomes less of a chore and more of a tool for your benefit when you understand how important it is for your church.
To properly budget, gather your current financial information. Most churches use the current year’s numbers as a base to project for next year’s budget. Seeing the current year’s data on spending and donations will help you understand the areas that need improvement in the church. I recommend talking to your board about your expenses before the end of the year. Take a look at where the church is spending money. Are these expenses helpful or a waste of money? Analyzing your church’s current spending along with the income your church receives will help you to project your numbers for next year.
There are several reasons why budgeting plays a crucial role in your church’s financial wellbeing.
- Planning for growth
The end of the year is a great time to start considering whether your church is ready to hire. As your church grows, the workload will also increase. Is your church considering hiring a new church administrator? Or if the church is new, consider giving the pastor a salary. Creating a budget for the upcoming year allows you to plan for such expenses.
- Preparing for banks and financial institutions
Banks and financial institutions will ask for your organization’s budget along with the current year financials. They do this to make sure you have a solid plan for the money they’re lending you and to make sure you will be able to pay the loan back. Most banks require up to three years of financial statements and information. For smaller churches with less history, they will ask for a budget or pro-forma.
- Planning for new events
As your church grows, the opportunity for new fundraising events will occur. Not only should you project expenses for the coming year, but you should also estimate the next year's income. Anticipating donations will help you plan fundraisers to increase income for the church. Most churches I work with will create an individual budget for each event they plan on hosting. This helps them project a more accurate budget for similar events in the future.
- Transparency for your donors
You aren't required to present your budget to your donors or church members. Many churches, however, like to show that they are allocating the church’s funds responsibly. Donors and members feel more confident in giving if they can see how the church is using the funds.
Approving the budget
The church bylaws should clearly state whether the board members or congregation votes to approve the church budget. Present the new budget to your board members (or congregational members) for approval. It's important they understand the projected expenses you have taken into consideration. During this time, they can give their input to make any possible changes or adjustments. Many organizations budget for each month. Doing so allows the board to see the financial wellbeing of the church by comparing it to the actual expenses that were incurred during the year.
The budget, along with last year’s financial statements, should be reviewed and approved during the first board meeting of the year. The sooner you hold this meeting, the better. I encourage you to check out this blog for some tips on what to discuss at your first board meeting in the coming new year.
Dependable bookkeepers you can rely on
Bookkeeping is vital for your church. Not only is it necessary for budgeting, but as a nonprofit, you need to keep track of how your organization is using donations. If your church doesn’t use a bookkeeping service, I recommend you find one as soon as possible. Why not use StartCHURCH’s service?
Through our bookkeeping service, an experienced bookkeeper will work with you to ensure:
- Your expenses are categorized correctly,
- Your bank accounts are reconciled, and
- You have your financial statements for any event.
One of the most common things I hear from clients is that they want a more organized approach to view their church’s expenses. With our bookkeeping service, we customize your chart of accounts with what fits your organization best.
With the end of the year approaching, it’s the perfect time to start working on your church’s budget. Having a budget for the new year will help your church prepare for another great year. If you haven't started thinking about it, now is the time! If you’re struggling with where to start, give us a call at 877-494-4655. We will gladly send you a free chart of accounts to help!