Who knew that one word could bring about such dread and eye rolling? The task of budgeting can be daunting and, let’s face it, creating a budget is not on many people’s wish list. However, it is a vital piece of the puzzle in ensuring the financial stability of your organization. In simple terms, a budget is a formal expression of the objectives and plans of leadership in financial terms. It covers all phases of ministry operations for a specific period of time and is a tool that provides fulfillment of the ministry’s visions.
In this article, we’ll discuss an eight-step process taught by Rex Frieze, CF, CPA at Frieze Consulting . It uses a ministry action approach and takes the guesswork out of budgeting. It requires an annual evaluation of your ministry’s purpose and goals. In turn, this enables you to properly plan for financial, facility, and personnel needs for your ministry.
Step 1: Review the Ministry’s Statement of Purpose
Let’s say your ministry’s purpose is Worship, Small Groups, Children and Youth Ministries, Outreach, and Missions. Reviewing the core values of the ministry is great motivation and provides a clear focus for allocating funds. This also helps resist the desire to allocate funds to seemingly worthy ministries (Women’s ministry, Men’s ministry, etc.). While these ministries are worthy and important, you should wait until ministries that relate to your ministry's purpose are funded before funding other ministries.
Step 2: Develop Goals and Objectives to Accomplish the Ministry’s Purpose
As Steven Covey wrote in The Seven Habits of Highly Effective People, "Begin with the end in mind." Through strategic planning, the staff and ministry leaders should develop major ministry goals and objectives. Discuss short and long term goals for each ministry and establish milestones for where you want to be in that timeframe in order to measure success of the goals. For example, enhancing the worship experience in the next year or updating the children’s facilities in the next three to five years.
Step 3: Plan Strategies to Achieve the Goals
Develop specific steps to achieve the goals! This will determine program, personnel, facilities, financial, and other needs. For example, if one of your goals is to enhance the worship experience, you may consider specific goals such as purchasing a fiber optic line for the worship center, installing new software and hardware to display lyrics and video clips, and training staff to run the worship service. For the children’s ministry, you could plan to update the interior (floors, ceiling tiles, paint) in year one, and establish goals for the exterior (paint, clean up, benches) in year two, etc. This level of detailed planning not only holds people accountable, it enables you to allocate ministry resources accordingly. Then, place the approved programs for the upcoming year on the church calendar.
Step 4: Estimate Contributions and Other Sources of Revenue
According to the “2009 Church Budget Priorities Survey” conducted by NationalChristianPoll.com, the biggest source of church income is tithes and offerings, comprising an average of 87% of the church budget. Other sources of income may include investments, bookstores, mission support, rentals, special campaigns, etc. There are many ways to encourage giving, but that is a totally different article! To ensure program expenses are covered, you must estimate and project income. For example, consider analyzing giving based on age range, using pledge cards, and studying prior year giving trends. ACS offers a variety of reporting on contribution pledge and giving totals as well as analysis of revenues and expenses. Be sure to discount one-time gifts and irregular gift patterns, and consider external impacts (i.e., law changes regarding deductibility of contributions, economic changes, etc.).
Step 5: Translate Programs into Financial Terms (Expenditures)
For non-profit organizations, the emphasis is not on the bottom line (profit), instead it is on the fulfillment of the ministry goals. According to Christianitytoday.com, there are several ways to calculate a budget; for example, the Pledge Rule (based solely on pledges), the 75% rule (pledges pay for 75% of expenses), or Line Item budgeting (retains line-item expenditures from year to year, making modifications as needed).
Rex Frieze at Frieze Consulting recommends Zero Based budgeting. In this method, all expenditures are justified each year, starting at zero, and only the funds that fulfill the stated goals are applied to the budget, thus preventing expenses from getting out of control. Also, keep expenses under control by evaluating phone plans, insurance premiums, and even staff needs according to the goal.
Steps 6 - 8: Finalize, Review, and Revise Budgets
Finalize budgets by obtaining approval from the ministry’s members or board. Budget dollars are then assigned to responsible staff/committees.
Review budgets on a periodic basis and monitor them through reports and variance analyses. This shows the effectiveness and efficiency in ministry operations. ACS provides a way to analyze budget-to-actual expenses and monitor monthly revenue. Finally, revise programs and their appropriate budgets as determined necessary throughout the year. ACS enables you to easily adjust budget amounts as needed.
Many unique pressures and challenges face pastors, staff, and lay leaders in the areas of money management and personal financial planning. Just as a contractor cannot build a structure without blueprints, a church cannot operate without a well-designed budget. This eight-step approach is a tool that helps guide you through the process. For a deeper look at budgeting using the Ministry Action Approach, visit Frieze Consulting. Rex Frieze has a passion for assisting churches and has a vast array of resources available.
Rhonda Howell is originally from Florence, SC, has worked at ACS for 17 years, and is the Program Manager for the ACS Financial Suite. She received a B.B.A. in Computer Information Systems Management from Francis Marion University. At home, she is kept busy by her husband and 3 boys - Justin, Blake, and Parker. She enjoys sports, anything outdoors, family, all types of music, singing, movies, and church.
