Steps to Building an Effective Church Budget

The church budget is more than just an essential part of managing the financial resources entrusted to the church. It needs to serve as the roadmap aligning the projected donations with the mission, vision, values, and focus for the upcoming fiscal year. Constructing an accurate and valuable church budget is a time-consuming and involved process. Churches that simply slap together a church budget in a week are not efficient; it should serve as a warning sign of lazy budgeting. In many cases, building a solid church budget can take up to five months. As each new fiscal year approaches, it’s best to start with a blank slate when it comes to church budgeting. This type of budgeting is known as a zero-based budget. This method understands that each year is different because not only will costs change, but the focus will change. 

Churches looking to create an effective church budget should follow these six steps:

Cast Vision for the Upcoming Fiscal Year

The budget is a tool to support the church’s mission, vision, and values. The church’s leadership must gather the ministry leaders (paid staff and volunteers) and cast the vision for the upcoming fiscal year. Ministry leaders need to take this time to imagine new ways to go after the vision and think about the financial resources necessary to accomplish the goals and objectives for the upcoming fiscal year. 

Project the Income

The financial team’s responsibility is to create the church’s realistic projected income target. Forecasting the church’s projected income is based on two basic church metrics, attendance, and giving, and church budget experts recommend using a minimum of 12 months of data. To start, use the attendance numbers to determine the trend in attendance – is the church growing or retracting? Then, multiply the last 12 months of giving by the growth/retraction factor. Add or subtract that factor from the 12-month giving total to reach a preliminary budget projection.

Ministry and Operational Leaders Build the First Draft

While the financial team is busy projecting the income for the upcoming fiscal year, the ministry and operations teams are putting together the first draft of their budgets. The first drafts support the goals and objectives outlined in the vision meeting. It’s normal for the first drafts to be larger than the budget can financially support.

Compare First Drafts to the Projection

Now it’s time to compare the financial team’s projections to the ministry and operational leader’s draft of the budget. At this point in the process, the church makes decisions on what to reduce. Remember to keep the mission, vision, and values at the forefront during this process. The church leaders and the financial team provide guidance to the ministry and operational leaders on reductions to their budgets. 

Refine and Finalize

With the appropriate changes to the ministry and operational budgets, it’s time to refine and make final adjustments. The result is a budget that funds the goals and objectives for the upcoming fiscal year, supports the church’s mission, vision, and values, and hits the income projection.

Communicate

The final step in building an effective church budget is to share the final results. First, provide the ministry and operational leaders with a copy of their budget as a guide throughout the year. Next, communicate the exciting news with the congregation. Sharing the church budget is a great way to promote how their donations will impact the community and beyond with the church.