7 Effective Church Budget Tips

Below are some effective church budget tips for your annual budget forecasting.

Church Budget Tips

First things first! What exactly is a budget? The Merriam Webster dictionary defines a budget as "...a plan for the coordination of resources and expenditures".

So a church budget is an excellent tool for allocating financial resources and for planning and controlling their uses.

Church Budget Tips...

Budget Tip #1

Establish a projected level of income: A good place to start creating your budget is a careful review of your church’s tithing history. Has it increased these last few years or declined? Figure the percentage of increase or decrease.

Church Budget Tip #2

Determine expenditures for the budget year:

The largest area of expenses is compensation—both salaries and benefits. Figuring you annual budget is a good time to stop and reevaluate compensation packages. Is your pastor getting the best package your church can give them as far as income taxes are concerned? Are you taking full advantage of tax friendly packages such as housing allowances, account reimbursement plans, and health insurance?

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Budget Tip #3

Allocating funds for operations:

The second largest area of expenditures usually relates to facilities—mortgage, utilities, maintenance, repairs, and insurance to name a few. Make sure you allocate some funds from operations to be designated for repairs and replacement of major items such as roofs, heaters, air conditioning units, etc.

Church Budget Tip #4

Determine variable costs:

Budgeting for fixed cost such as mortgages is easy. However, determining your variable cost such as utilities can be very challenging. Gas and electric charges have skyrocketed in the last few years. Check now what the going rate is and what your utility provider projects to be the cost by January/February of next year. You may be looking at a 10 to 30 percent increase in what you actually paid last year in some areas of the country.

Budget Tip #5

Get everyone involved:

The Youth minister may have some great fund raisers planned to help with their expenses and the Sunday School committee may know where they can get donated supplies. Make sure everyone knows it is OUR budget not just YOUR budget.

There is a whole chapter devoted to church budgets in Lisa and my book "Church Accounting - The How to Guide for Small and Growing Churches"

The Budgeting for Churches chapter include:

  • The process necessary to prepare a budget
  • How to do monthly budgeting
  • The difference between budgets and forecasts
  • How to use your forecast for analyzing cash flow

Church Budget Tip #6

Build reserves:

It is really difficult to get ahead with the challenges our churches face today. One way is to try to build some reserves over time that can help meet those unexpected expenses and significant increases. If you are able to budget a bigger increase and then expenses are not as high as predicted, you can set aside some or all of the unspent amounts to begin the process of building a reserve for those line items.

Budget Tip #7

Restricted funds:

These funds are generally not included in the budget process. However, it is absolutely vital to the integrity of your church, and the legal responsibility of the board, to insure that restricted funds are spent in accordance of the wishes of the donor.

In conclusion, we are given an opportunity to use the finances of our church to be witnesses in our communities and worldwide. Preparation of an annual church budget will help your church to reaffirm and focus on its vision to reach the world for Christ. So be good stewards of God’s money and budget wisely.

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