Creating a Church Budget for the First Time

Having a budget in place is a useful feature for a church or non-profit organization. A budget is an important metric in evaluating the yearly performance of activities of the church. A budget also empowers the workers to act somewhat autonomously as long as they stay within the confines of the budget.

Setting a budget for the first time can be a challenge. At first, it may seem that there is not even enough money coming in to bother with such a plan. In reality, managing small amounts of money can be very useful. In time, as the structure of the budget grows, the freedom that comes from having a structured spending plan in place also grows.

So where does one start on building a budget. If the church has any history of previous spending, that is often the best place to start. If there are several years of spending history, that is even better. With one year of history, there may be spending anomalies such as one-time purchases, or emergencies that will not recur from year-to-year. With several years of history, the expenses can be averaged, and the likelihood of normal spending habits should be easy to establish.

Start with a month-by-month pattern of spending. Evaluate the recurring expenses. They are often the “fixed costs” of an organization. Salaries, utilities, regular maintenance, office supplies, and scheduled events often fall into these categories. Quite often, these costs represent ninety-percent of the organization’s spending. The remaining portion of spending can be on one-time purchases, replacing old equipment, taking advantage of new opportunities, and increases in salaries and maintenance. Obviously, there is not a lot of money available for these items. Therefore, a multi-year spending plan on new purchases and salary increases has to be taken into account.

If a chart-of-accounts exists, each major item in the list of accounts can be assigned a budget amount. If a list does not exist, it is usually a good idea to create a complete list of accounts or spending categories, and then assign a dollar amount to each item on the list.

Once the budgeted figures are in place, a periodic review of actual spending vs. budgeted spending can be produced. It is often the case that spending sometimes takes place faster or slower than the timeframe anticipated by the budget. In a review, it is good to compare the actual spending to a year-to-date budget. This way, if the spending is less than anticipated, money can be set-aside to meet with known budget amounts that will occur before the year is complete.

A budget is an important tool for running a church or organization efficiently. It aids in keeping control of expenses. It empowers workers to work autonomously. It also provides a metric for how efficiently the organization is running.

Source by John D Meyers