Regardless of what type of charter, leadership model or priorities a particular church has, they should put together a financial plan at the beginning of the year to support regular yearly functions, as well as any specific vision or goals held by the organization. Here are some questions to think about when creating a church budget:
Is there a pattern to your congregational tithing from previous years? Determine the rate of increase or decrease and project what might be available this coming year.
Yearly expenditures; human resources
Start with assessing salaries and benefits for your pastor and other paid personnel. Think about offering more tax-friendly benefits, such as help with housing and health insurance.
Yearly expenditures; operations
Consider the cost of your facilities. Is there a mortgage, rent or loan? Also consider insurance, maintenance and utilities. Be conservative on amounts that may vary, such as utilities.
Churches often plan events or projects to help with or support their local or global community. This could include school or evangelistic events or mission trips, sending help or volunteers for disaster care or other outreach. Get everyone who has a say together to pitch ideas and project those costs, while deciding how they might be funded. Don’t wait until the last minute.
Based on previous years or on research, imagine what kinds of fundraising might be considered and project how much could be raised to support church projects. Don’t forget to consider the financial investment that might be necessary to start a fundraiser.
Reserves, savings, and investments
Donated financial gifts, property or other resources could be placed into reserves for future use. Additionally, many churches make low-risk investments in order to create passive income.
Track donation requests
Donations toward a specific purpose should not be included in your yearly budget for church operations. See to it that the funds or resource goes to that project or expense and document it.
3 Types of Non-Profit Budgeting
A yearly church budget can be put together in three different formats:
Also known as incremental or traditional budgeting, line-item budgeting uses the previous year’s budget as a template for the following year. Based on expected variances in cost or changes in activities, adjustments are made.
Common for some non-profits, program budgeting looks at previous programs and projects, evaluating them for efficacy in proportion to costs. They adjust the budget based on their evaluation of projects that should be repeated or left out based on what was accomplished in proportion to the cost, as well as their future income projection.
This type of budgeting (starting with no money allotted to certain programs) requires that each department justify their expenses for the upcoming year. Due to the time-consuming paperwork and effort required, it may not be good to use this every year; however, many non-profits incorporate some level of zero-based budgeting every 4-5 years just to make sure they take a fresh, unbiased look at programs that normally renew annually.
It’s common for churches to reduce expenses by using volunteers to perform tasks and services as often as possible. That said, tackling their budget, finances and regulation requirements might be best approached with professional help. Myrick CPA can guide your church in navigating budget creation, execution and documentation with our professional services, so your church can better serve your community.