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Posted by: Charles P Myrick CPA Posted on: Jul 03 2018 Posted in: church budgeting

What Makes a Successful Annual Budget for Churches

Developing an annual budget is a challenge for any organization, but churches have special considerations to keep in mind. Because faith-based organizations exist primarily to support the faith of their members, tasks like preparing an annual budget can get lost in the shuffle of other responsibilities.

Annual Budget Considerations

Before meeting with your financial professional for the first time, your church board (or church administrators) should be prepared with some information to share.

  • First, you should have records of actual financial statements for at least the current year. This will give you a good idea of both your expenses and your potential for income.
  • If possible, it would be even better to have several years of records on hand. This will allow your financial professional to account for any anomalies. For instance, you may engage in a capital campaign one year and see a more substantial than usual amount of income. Then, in the following year, you may spend all of the money on renovating a portion of your church or implementing a new program.
  • Changes in income and expenses are also important things to know before meeting with a financial professional. If you have long-term plans for fundraising or spending, you will want to share these as well. Accounting for all possible variances in income or expense will only help you to be more prepared for budgeting.

Quarterly Budget Review

The best time to start planning for the next fiscal year is immediately when the current fiscal year begins. This may seem unnecessary as you don't have final numbers to work with in planning a budget, but evaluating your budget as you go will help you to find potential issues and prepare for them in coming years.

A quarterly review is a good start for planning for the next annual budget. At the end of the first quarter, you can look for general trends in donations. Note any potential for extreme increase or decrease in the next quarter. Then, look for any expense that was unexpected or higher than expected. For instance, if you have already met your entire year’s budget for office supplies, take note of this. You will want to be sure that this was intended to be a one-time purchase.

As you look at each quarter of your income and expenses with your annual budget in mind, a more clear forecast of your budgeting needs is possible. This will help you to anticipate needs and find areas that you are able to grow. More importantly, focusing on the annual budgeting throughout the year helps to eliminate any unnecessary surprises.

When it comes to preparing an annual budget, it is critically important that this task is managed with knowledge, integrity, and professional expertise. Volunteers and staff must be involved, but financially sound churches prepare these budgets with the guidance of a qualified professional.

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 Charles P. Myrick is a Washington, DC accounting firm offering specialized CFO services to churches and religious institutions. Myrick CPA was voted Best Accounting Firm in DC, 2016 and 2017, Washington City Paper Readers’ Poll. Request a confidential consultation, today.   

 

 

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