3 Tips for Creating Your Church's 2021 Budget
By Kevin Camon
As we approach 2021, it's time to start planning a budget for the New Year. However, we know this can be one of the most challenging tasks for a church or ministry. Pastors and ministers may not have the needed financial experience to budget for a church or ministry properly. However, at StartCHURCH, we want you to know that it is possible to make the process stress-free and rewarding!
Proverbs 21:5 – "The plans of the diligent lead to profit as surely as haste leads to poverty."
This final rule from Proverbs more or less sums up all the others. Budgeting, planning for retirement, saving for emergencies—they're all different ways of being diligent in your planning.
A budget is one of the most essential plans your church can create. However, along with the desire to do more to spread God's word, pastors need to understand that finances largely dictate the ministry. Studies show approximately one of every two churches in America is in debt. Closely examining your church's debt is key to building a sound financial plan. But you can't do that without first learning to budget.
In today's blog, you'll learn three tips to create the best budget for your organization as you enter 2021.
Tip #1: Determine your income for the next year.
A good starting point is to gather your church's history of past income like your income statements for the last three years. If you don't have an income statement, go to your bank account deposits, which will include tithe, missions, building fund, special projects, etc. Then you assign every income transaction to one or more of the income accounts created. You can also split one transaction among several accounts. The key is to be detailed in tracking every penny and assigning them accordingly. Some common sources of income for churches include:
- Offerings
- Tithes
- Charitable donations
- Building fund
- Vision funds
There are also less common facets, but these are still important to account for. Such facets include:
- Investments
- Sale of products
- Event registration
- Designated gifts
These are the areas that have the possibility of change, so you will want to consider these areas when factoring your income for your up-and-coming budget.
To learn even more helpful tips on budgeting for your church or ministry successfully, check out our newest Beyond the Call podcast episode! Click the player below to listen now, and subscribe for weekly episodes geared toward helping leaders like you protect what God has called them to lead.
Tip #2: Determine your expenses for the next year.
You can create as many accounts as you need for your expenses such as utilities, salaries, mortgage or rental payments, insurance, maintenance, benevolence, taxes, licenses, fees, etc. These are your primary operating expenses. They typically will be the expenses that are necessary each month to operate and usually doesn't change much in amount. Your repairs and maintenance account or benevolence account are two areas that most churches have a hard time gauging during the year due to unforeseen circumstances like the A/C going out, having a leaky roof, or assistance with funeral expenses for a member of your organization. Having to spend money on unanticipated repairs or events can throw your budget into an array if not planned accordingly. It would be wise to build in an extra amount in this area, especially if your church is older.
Tip #3: Focus on your budget expenses.
Strive to be a good steward of what God provides. The Parable of the Talents (Matthew 25:14-30) and many other scriptures tell us that He will stop providing if we are careless with what He's given us. One of the biggest "DON'Ts" in budgeting is setting more expenses than income.
Your accountant will deliver your financial report for the month. Compare the income to your expenses for that month and then focus on your planned budget. The budget will list the estimated amount of income or expense the church is forecasting for the year. Below your income, your report will show the amount of money you spent as well as your year-to-date figure. At the bottom of your financial report, you will find your "Net Revenue" section for the month. Your net revenue lets you see if you've spent more than what was received in income or vice versa. In a case where you've had more expenses than income for the month, this formula will show true in this example:
($2,500/ income) - ($3,500/ expenses) = (-$1,000/ net revenue)
It is imperative to monitor your budget totals and your net revenue each month to gauge the stability and growth of your organization.
Once you have your totals on what you've spent in each category, you need to make some decisions about things like,
- In which categories do we need to spend less money?
- What should we cut back on this year?
- Can we raise the budget for this category?
- What categories do we anticipate spending less money?
When comparing the income totals, most churches will agree that the summer months tend to decrease in giving. There's no need to panic because you've noticed the same trend when reviewing previous years and concluded that the income increased once summer was over. If there are events that cause a significant decrease in giving like COVID-19, the board will have to take appropriate action to curb spending or seek other income.
Be sure to consider growth for your ministry. For example, do you plan to start any new ministries or departments? What events do you want to prepare for in the new year? Begin plugging numbers into these categories for these items until the expenses match your budgeted income. If the numbers aren't working for you, you will need to have another board meeting to restructure your budgeting plan by either decreasing some of the expenses or make a final decision to raise your budgeted amount in the different categories.
Learn the Benefits
Many pastors and ministers confess that the time they spend working through church finances steals their passion for other things, leading them to ask themselves, "How can I get back to doing what I love?"
Do you relate? We have great news for you!
With StartCHURCH Bookkeeping, we'll take care of your church's finances so you can focus on fulfilling your God-given calling to do ministry. Sign up today so you can get back to loving people and changing lives!
If you don't have someone who handles these tasks for you, check out our Bookkeeping Service to see how adding a ministry-minded bookkeeper to your staff can greatly benefit your organization! Give us a call to speak to a specialist at 877-494-4655!
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