How Do You Present Church Finances?

how to present church finances

The Elephant In The Room

How To Have Difficult Conversations About Church Finances

We’ve heard from so many pastors that their budget planning process is discouraging, full of tension, and devoid of joy.

There is a sense that anything else would be easier than the stress of budget planning and having conversations about how the church’s money is being spent.

So we put together a free live training to help change the narrative around budget planning.

And now we’re sharing the replay with you:

Our goal is to help pastors and church leaders navigate these difficult conversations with grace, know how to present church finances, and equip you to be a good steward of the resources entrusted to your church. 

Don’t let bad financial decisions or uncomfortable conversations be the downfall of your church. Learn the skills you need to build a healthy financial foundation for your church today!

HOW TO CREATE A HEALTHY CHURCH BUDGET

IT’S TIME TO PLAN YOUR ANNUAL CHURCH BUDGET

For many churches, fall is an exciting time! There are a host of programs, ministries, and outreach events that are happening. Many people return to church after a summer of travel and family events, regular programs restart after the summer break, and there’s a sense of energy and excitement about a new season and slightly cooler temperatures.

However, for pastors and church leaders, this season can also bring a sense of overwhelm. Because while everyone else is reconnecting and enjoying a return to routine events and programs, church leaders are (or should be) behind the scenes planning the annual budget for the next year.

With it being such a busy season, it can be difficult to find the time to actually cast vision and create a plan for your church budget. But taking the time to plan and build a vision-centered budget will truly make a difference in the life of your church.

WHY YOU NEED A VISION-CENTERED CHURCH BUDGET

Without a vision and a plan, you hinder your church’s ability to grow. In churches, it’s easy to spend money. There are many “good” ministry activities to support. But how do you know the money you’re spending is the BEST use of funds? The only way is to budget for expenses based off your vision.

HOW TO BUILD A HEALTHY CHURCH BUDGET

Here are three vision-casting budget hacks to help shape your budget conversations and get the most out of your meetings.

1. AIM FOR ALIGNMENT

Your budget should reflect the overall mission, vision, and values of your church. This goes for each and every department. Think of alignment as a filter you lay over the budget. As you examine each line item, ask the question, “Are we using our resources to help us advance the goals of our church?”

2. TRANSPARENCY IS CRITICAL

Asking your church to affirm and support the annual budget requires trust. Take time to evaluate how you can grow in your communication and transparency. A few simple ways to accomplish this could be by sending out a survey or holding a dinner for a group of trusted members so that they can provide feedback.

3. BUDGETS NEED DREAMERS

Budget reviews and planning meetings can go negative in a hurry. And while it’s important to be practical and realistic about the numbers, don’t forget to dream. Remind your finance team that God has big plans in this next year. Leave room in your budget for God to show up.

These budget hacks may not solve everything, but they will guide your conversations in a God-honoring direction. In the end, that should be the goal of every church budget.

NEED A LITTLE MORE HELP?

Your church budget should be a blueprint for financial health and ministry effectiveness. It should simplify decisions and fund the growth-engines of your church.

But, more often than not, that’s not the case.

Sometimes it’s because you struggle to know how to do it well. If that’s you, then Church Budget Blueprint can help.

Other times it’s because your team isn’t aligned. Perhaps you have a finance committee that doesn’t see eye to eye, or a volunteer bookkeeper who insists on doing things the same way they’ve always been done.

We’ve seen it happen over and over again. That’s why we’re hosting a free training later this month: The Elephant in the Room: How to Have Difficult Conversations About Church Finances.

You’ll learn why a healthy church budget is so vitally important to the life of your church, and how to navigate challenging conversations about finances and the church budget with wisdom and grace.

Make sure you’re on our email list so you can be the first to get the details on this free training.

We’ve seen too many churches struggle with this exact situation. And we want to offer a better path forward.

With a well-prepared, vision-centered budget and the tools to navigate these conversations, you can reduce the overwhelm you currently feel, and be confident that you are stewarding the resources of your church well.

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3 Keys to Plan and Execute a Meaningful Easter Sunday 2022 

Simplify Your Easter Planning

Believe it or not, Easter is just around the corner. 

Arguably one of the most impactful Sundays of the year for pastors and churches, it is imperative that we take every opportunity to make the most of it.  Absolutely, we know that God is at work and moving in the hearts of people, but we can take action and do our part to be prepared for what God brings. 

As we head out of the cold months (at least for those of us up here above the Mason Dixon line), it can be hard to think about what’s just ahead in April. But the key to a successful Easter service in 2022 is preparing early AND thinking through how you can meaningfully impact the lives of those who will walk through your church’s doors this Easter. 

Click here to download your 2022 Simplify Easter Planning Checklist.

Why Easter Sunday Matters in 2022

Pastor, let’s be real for a minute. For as long as you’ve been in ministry, you’ve probably heard the adage that Easter Sunday is one of your most important and most impactful Sundays. It’s one of the few times a year you will get a flood of visitors to your church. You need to be prepared and go all out to make it meaningful. 

In fact, you may have heard these messages for so long that it’s become routine. Easter Sunday can easily become just another thing on your never-ending checklist.  

BUT.  

Easter Sunday matters in 2022 because we are living through a massive shift in the way that people think about the church and its relevance to their daily lives. And as the world shifts and attempts to move into some sort of new normalcy, you may even see an even high percentage of visitors this year. People are hurting. People are searching for meaning and a way to make sense of life.  

And while times have changed, the TRUTH of the gospel and the HOPE we have in Jesus has not. 

If Only Planning and Executing a Meaningful Easter Sunday Were That Simple

Knowing that Easter Sunday matters is one thing. Planning and executing a meaningful service or other weekend event is something else entirely. I get it. Planning for Easter Sunday can feel overwhelming, especially if you have a small team and a limited budget. (Or, if you tend to wait until the last minute to plan…as I am often prone to do).  

You don’t want to miss the opportunity to reach more people…but there are only so many hours in a day. That’s why we created the 2022 Simplify Easter Checklist. This checklist will help you plan a meaningful Easter weekend without the overwhelm.  

At Simplify Church we exist to help pastors simplify and grow healthy churches. That’s why we provide education and financial services for small and growing churches. And that’s why we created this checklist. Because we want to partner with you to make Easter 2022 meaningful.  

Download the 2022 Simplify Easter Checklist   

This blog post will walk you through three keys to make Easter 2022 meaningful. The checklist will give you the timeline to make this a reality for your church…regardless of the size of your church or the number of people on your staff. Remember, the more resources you have, the more you can do. But always choose quality over quantity.  

Making Easter 2022 Meaningful

So what can you do to make Easter 2022 a meaningful and impactful weekend for your church?

Establish What Success Looks Like

The very first thing you need to think about is what success would look like for your church. Nope, not anyone else’s church. Yours. 

Without an end goal in mind, we have no way to know where we’re going. Every time you take a road trip, you have a starting point and an end destination in mind. From there, a map will give you the directions on how to get there. 

The same principle applies here. If you establish what a successful Easter weekend will look like, or what you want the end result of the service to be, you can then reverse engineer the steps required to get there.  

What do you want to accomplish with your Easter service? What are your goals?

    • More first-time guests? 
    • To encourage infrequent attendees to become regular attendees? 
    • Salvations? 

Your goals can be anything, but the key is that you come up with a measurable result. If the goal cannot be measured, you have no way to know if you’ve accomplished it. Feelings and perceptions can be dangerous, especially when it comes to leadership. 

Think about the growth engines and the mission of your church. Do your Easter weekend goal(s) align with your church mission and vision? And are they realistic? It’s easy to want to do ALL the things, but with a limited budget and staff, you must be more selective and realistic about what your focus should be.  
 
We want to reach everyone with the message of the gospel, but usually if you’re trying to reach everyone, you’re reaching no one. If instead, you focused on reaching families with young children with your Easter weekend…then you would build your sermon, your promotions, and your activities around that demographic. You could offer a community Easter egg hunt, or have a special kids activity during the main service.  

Once you determine your focus and goals for the weekend, you’ll put together your sermon theme. Everything you plan for the weekend should revolve around this theme and your goals.

Make A Plan

This includes sharing the vision of the goal with your team. Your team may be just you and your wife or it may be a full staff of people, but either way you need to articulate it with someone else.

Side note: by sharing the goal, you may realize more details about the goal you hadn’t considered when working on it by yourself.

Once you’ve shared the end result plan, its time to figure out what you’re willing to do to get there.  This includes preparing a budget and plan.

Now the budget needs to be both monetary and commitment.  This involves how much you are willing to spend on tangibles, but also how much time you’re willing to allocate from yourself and your team.  There will be some involvement that has to occur and you cannot do this alone.

Once you have a plan of action and a team, work together to take bite-sized steps of action towards your goal. The checklist has suggested actions to take the four weeks leading up to Easter Sunday. Feel free to use these actions or create your own timeline and task list to set your church up for success.

Debrief After the Fact

Having a goal is great, and having an easy-to-follow plan will dramatically boost your effectiveness (and reduce the overwhelm you feel), but a true key to growing a healthy church is taking time after the fact to reflect, assess and debrief the weekend.  What went well? What were your key metrics? What can you learn from those numbers? Where did you struggle? And how can you learn from that experience?

Many leaders will tell you that the follow up (and follow through) is often just as important as the task or event itself. Be intentional about looking back with your team once Easter has passed and measure the results.  Find out which parts of your goal you achieved, and in what areas you may have fallen short.

Bonus: Take Time to Rest

I shared with you three keys to help you plan a meaningful Easter Sunday weekend in 2022. But I want to leave you with one last bonus tip to help you grow a healthy church. And that is to make sure you intentionally take time to rest.

It’s easy to let our schedules fill out, and to work hard in support of some very good goals. But one of the most important elements of a healthy leader is the ability to lead from a healthy place. And that involves taking times for rest, especially after a season of extra work. Planning for a big weekend like Easter can take a lot out of you as a pastor. You will need to rest and recharge to be able to maintain and sustain growth for your church.

Have You Downloaded The Simplify Easter Checklist Yet?

If not, here’s another link to the checklist. It will help you avoid last-minute stress and set your church up for maximum impact. 

Whatever you choose to do this Easter, know that we are here to support you in whatever way we can. We understand the challenges that come with doing ministry because we’ve been there. If you’re ready to focus on growing a healthy church, schedule a free discovery call. We’ve helped hundreds of small and growing churches optimize their church finances, and we’d love to do the same for you.

The Foundation of It All

Whatever you plan to do for Easter, we know you will cover everything in prayer. That’s the one part we didn’t mention first, hoping that was a given. The best thing you can do is start praying now for how God will lead your church into the Easter season. While we can make plans ourselves, the best ones are the plans that God lays on your heart.

We’re praying for your Easter service this year and know that God has big things in store for your church if you’re faithful to following His leading.

How to Build A Post-Pandemic Church Budget

annual church budget planning

Building Your Annual Church Budget in a Post-Pandemic World

Before we get too far, I completely understand that the pandemic is officially not over.  I realize that our world is still in a state of confusion and no one really seems to know what’s going on or what will happen next. It unfortunately seems that we’re at a point where we’ve never been more divided as a country. Regardless of your stance on the current issues, I’m sure we can all agree that things are a little bit chaotic right now.

You’re probably experiencing that chaos first hand as you try to continue to lead your local church and meet the needs of people in your congregation and community in these unprecedented times.

If you’re like most pastors, you may feel like you’re hanging on by just a thin thread, but rest assured, your efforts are for a far greater purpose than we see right now.

It's Time to Build Your Annual Church Budget

As we head into a new year (can you believe it?!), it’s time that we discuss your church’s budget for the upcoming calendar year.

In 2021, the finances and financial accounts of many churches were unpredictable to say the least. Your church might have experienced this. And because of this unpredictability, you might be thinking that you have no idea how to budget for 2022 based off the current year.

Here are some considerations to help you start planning for your 2022 church budget.

Assess the Current State of Your Church Budget

In our Church Budget Blueprint Course, one of the first steps we discuss for planning your budget is that you need to know where you are. If you’re looking for directions on your phone, it will always ask you to choose a starting location. It’s virtually impossible to give directions if you don’t know the starting point.

The same is true for budgeting. Because your budget is a plan, it is really hard to chart a course if you don’t know where you’re starting from.

How To Review Your CURRENT Church Budget

Begin by taking a look at this year’s financial reports. While the church finances may have been all over the place, you should be able to get some information about the current financial status of your church.

What do your financial numbers tell you? Has church giving increased, decreased or stayed roughly the same versus last year?

There are a lot of churches that look vastly different than they did in February of 2020.  After months of virtual church services, many congregations are seeing fewer attendees than they did before everything started. At the same time, there are many churches that are seeing new people that they didn’t have prior to the pandemic. By being forced to do ministry differently, many churches are seeing people that may not have otherwise stepped foot inside a church and that is a good thing.

In order to know where to go from here, though, you’ll need to get honest about your current situation.

What questions do you need to ask?

What does your attendance currently look like? Are you seeing the same number of regular attenders each week? Are you seeing the same number of visitors? If you are still offering virtual services, how many people tune into these services regularly? 

What does church giving look like? Do you know your giving per unit and giving per capita?  These two metrics will help assess the health of your church giving. 

Along with church giving, what is your average weekly and monthly amount?  How do those compare to previous years?  

Without a good understanding of these numbers, it will be difficult to accurately plan for the future.  

To be honest, the last 6-9 months are probably a good indicator for your new reality moving forward.  While uncertainty still exists, we must realize that many people have established a new normal for themselves, and decided how they will live and what level of socialization they are comfortable with, at least for the foreseeable future. The people showing up on Sunday mornings and those participating in giving right now are probably the ones you can count on moving forward.

How to Draft a New Church Budget

Now that you know your numbers, and have some understanding of where you are, we can begin to formulate a plan to move forward into 2022.

As you develop your budget, take the numbers you found from the past 6-9 months and use those as a baseline for projected giving trend moving forward. Then take a look at your spending and expenses over that same time period. Is your spending in check or are you spending more than you are bringing in? Do you need to make some adjustments?

Finally, think through what you want for your church in the year ahead. What vision do you have for your congregation? Does your projected spending and budget allocations help move you towards that vision?

Be prepared to drastically change your budget if necessary. Don’t allow yourself to get so tied in how things were done in the past that you neglect an opportunity to pivot. One thing pastors and church leaders have learned over the past few months is how lean some ministries can be. We’ve also had the opportunity to get clear and prioritize what really matters. Perhaps there are some areas of ministry that you don’t need to fund or prioritize moving forward.

Once you’ve thought through these important questions, formulate a church budget plan that will guide you and your church in 2022.

Can you adjust your budget Mid-year?

The great news is that your church budget isn’t set in stone. It is a plan, not a legally binding document. The plan you put in place now can be adjusted as you move forward.  While it’s not something you want to adjust haphazardly or randomly, you should do a quarterly and semi-annual review of your church budget to determine if the plan you put in place is matching up with your current reality.

What if you need help with your church budget?

If church financial planning or developing your church budget is causing you stress, don’t hesitate to ask for help and guidance!
One thing that became evident during the pandemic is that pastors need pastors. Let me suggest two opportunities for you as we head full speed into the new year.

First, if you know you need help, schedule a free discovery call with us. We will talk with you about church financial support options for your church and help you decide what is best for your church. Getting financial help is way more affordable than you think!

Second, consider joining our FB group for pastors we call Oasis. Be connected with other pastors who know what you’re experiencing and are open to real discussions about the joys and hassles of being a pastor. You can be real with us without fear of losing your “pastor card.” 

Regardless of your next steps, be sure to take the time now to plan for 2022.  How you plan now will determine the trajectory of ministry going into the new year. One thing is certain, time will continue moving forward. It’s up to you to determine what you do with what you have been entrusted with. The old adage is still true, people don’t plan to fail, they fail to plan. While plans are never a guarantee of success, and you may need to make some pivots along the way, you will never get to where you want to go without a plan in place.

Here’s to building a great church budget plan and seeing your church thrive in 2022!

4 Keys to Manage Your Church Budget in a Crisis

church budget planning

One of these two things are true.  
 
You’ve seen a shift in your giving amounts over the last few weeks. You haven’t seen a shift in your giving amounts, but you need a plan for the potential economic recession that is coming. 

The fact is that the unemployment rate across the country is at an all-time high. A huge percentage of businesses, business owners and employees have been affected by this pandemic and we will see how those numbers play out for the economy over the next several months. This is why – regardless of what giving at your church looks like today – you need to have a plan for how you will handle a potential financial impact to your church.  
 
Here are four keys to help you analyze and manage your budget in a time of crisis:  

Have a good understanding of what your numbers look like 

With any roadmap, unless you have a good understanding of where you’re currently at, you’ll have a really hard time coming up with a route that gets you to your destination. The same is true for your church budget.

In order to make smart budget decisions, you really need to have a good understanding of your current situation. This includes knowing your current numbers, trends and balances.  If you don’t know your financial numbers, you really don’t know your church. 

 Yes, I will admit that there are some guys that focus too much on numbers and completely miss their mission. But what we see more often is the reverse – pastors that have lots of big ideas and passion, but just guess when it comes to church finances.

Without keeping a pulse on the financial health of your church, there is no way to make wise financial decisions, plan for the future, or determine how and where you can actually save the church money. Knowing your numbers is simply good stewardship.  

What does this look like practically?  

If you’re a Simplify Church Bookkeeping partner, this part is easy. Just by looking at the monthly reports we send you, you should have a good handle on how your church is doing financially. Additionally, your account manager is available to provide you more detailed information, answer questions and alert you to potential problem areas. We can also generate year-to-date (YTD) reports to help you better understand the story your numbers are telling. Using this service can save you lots of valuable time and effort!

Okay, but what if you’re trying to manage things yourself? Well the most important report you need to analyze is your Statement of Accounts (Profit and Loss) Report. This will show you in detail what you took in last month and what you spent.  Some financial software solutions also offer the ability to match those numbers against your budget, so you can see how that your actual expenses are trending against your budgeted plan. 

You will want to review these reports for the last couple months, as well as look at your YTD trend. If you budget on a calendar year, you can look at the amounts from your first quarter as well. Obviously a lot has changed in the past several weeks as far as giving and income goes, but you want to understand what your expenses and income looked like before the crisis, so you can begin tracking any changes to that trend. Ask yourself, “What story are these numbers trying to tell me?

Analyze your critical expenses  

There is a very real chance that giving and income will go down for your church, either now or in the coming months. The good news is that without meeting physically, there are quite a few operational costs that should go down as well.  

Renters: If your meeting space is no longer open to public gatherings, you may be able to save on some rent expenses. Contact your landlord to discuss your options. 

Property Owners: If you own your building, you can keep the thermostat down and not heat or cool the worship center. 

Maybe you provide snacks, donuts and coffee during Sunday morning worship. While probably not a huge expense line in your budget, this is one place you can save a few dollars when cash flow gets tight. 

Go through your expenses line-by-line and see what you do not need or any expenses/services that can easily be cut out. Perhaps you have some subscriptions to a service that you aren’t really using. 

This is the time to determine which church budget expenses are critical and which ones are nice-to-haves. Understanding your critical expenses will help you analyze where savings can be found in your church budget. 

Things like payroll, insurance, and other fixed ministry costs will be much more difficult to cut during this time. If you haven’t already applied for the Payroll Protection Program to help offset payroll costs, watch this video to see if this might be a good option for your church.  (Yes, I know the funding ran out…but more funding will hopefully be available soon).

Pro Tip: if you own and have a mortgage on your building talk to your bank. They may have options available to you to help offset your payment during difficult times. Many banks offer interest only payments to churches during slow giving times.  Remember, you never know until you ask. 

Call your congregation to generosity 

Talking about generosity is one of those areas many pastors shy away from. Now is not the time to neglect talking about generosity. In fact, it is a disservice to both your people and your organization if you don’t talk about generosity in this season.  
 
It is much easier for us all to prioritize giving in seasons of abundance. Prioritizing giving to God in seasons of uncertainty and turmoil requires more faith and trust, but often leads to more opportunities to experience God’s faithfulness along with greater freedom and joy.  

Remind people each week how they can give – via online giving, text to give, or by mailing a payment to your church. You can also make it easy for people to drop off payments if you don’t have online giving options. Let people know that you have setup a convenient drop box to drop off their tithe payments.   

If you haven’t yet set up online giving at your church, now is the time to get started. And once people set up recurring giving, it makes it simple for them to continue to give generously (and it makes it much easier to predict your monthly income). Setting up online giving is quick and easy to do, especially if you use a system like Simplify Give. 

Beyond explaining the various ways to give, part of the discussion needs to be a reminder of why giving is crucial to the church, especially during a time when you’re not meeting together corporately. Explain how the funds are being used and how the church still is able to continue to function and to meet tangible needs through the generous donations of members.  

For a more in-depth discussion of this topic, we’ve put together a comprehensive guide on How to Talk About Giving & Create a Culture of Generosity in your church. You can access your FREE copy here. 

Prepare a church emergency budget 

Once you’ve analyzed your numbers and you know where things are at, it’s time to put together an emergency or contingency budget that will help you navigate through the next few months.   

  • What purchases were you planning to make in the next few months? Can any of those be delayed? 
  • Which expenses will help you move your church forward during this digital season?  
  • Which expenses are not serving your church right now? 

As you evaluate your expenses, think through you church vision/mission and strategic goals. Which expenses will help your church continue to grow? Which items fund your growth engines? Do you need to reevaluate any of your growth engines or goals?  

If you’re not sure why I’m bringing up the topic of growth engines and goals, check out this post on the seven “deadly sins” of church budgeting (and what to do about them) or this post on church budgeting 101.  

Now put your emergency budget together.  This is your financial plan to help your church not only survive this crisis, but to be ready for what comes next. You may never experience a dip in giving, but now you have a plan in place. As I’ve said many times, a budget is just a plan. But it’s an important one.  
 
It is fear of the unknown and uncertainty that breeds stress. When you put a plan in place, you relieve stress and better position yourself and your church to ministry to people during this very uncertain time.  

Look to the future 

In this season, many people are feeling confused and afraid. What better way for the church to show up than as people who are not operating out of fear, but out of faith and as good stewards of the resources God has given them. When your church has a solid financial foundation, you can focus your time and energy on being a light and a beacon of hope in this season.  

Not only that, you can position your church for whatever comes next. We don’t know when this season will end. What we do know is that once the guidelines on social distancing relax, there will be great need, but also an open door of opportunity. Will you be a church prepared to lead and serve and love through recovery and revitalization? Or will your church be focused on recovery yourself?  

Here’s another question: Do you want to figure this all out on your own? Or do you want to partner with a team of church financial experts to help you manage your church finances and plan for the days ahead?  

Our done-for-you payroll, bookkeeping and online giving services will take the financial burden off your shoulders and give you peace of mind. If you’re not confident in your numbers or you’re wasting valuable time trying to figure it all out, schedule you free consultation call today.  

Because this is also true: Taking time to make wise strategic and financial decisions now will help you navigate the days, weeks and months to come.  

Can a Church Show a Profit?

It’s the end of the year. You sent out an end-of-year giving letter and your congregation responded. 

Suddenly you have more money than you anticipated having. But then you worry: 

  • Is this a bad thing to have excess funds at the end of the year?  
  • Do I need to run out and spend it immediately? 
  • What should I do with this money? 
  • Will we lose our nonprofit status? 

You can breathe a sigh of relief. You’re not about to lose your status.  

There are four big questions that churches frequently ask about end-of-year finances. What most churches want to know is: 

  • Can we have a surplus of money at the end of the year? 
  • Should we aim to have a surplus at the end of the year? 
  • How much of a surplus should we aim for? 
  • What should we do with that surplus? 

When we say surplus, what we’re really talking about is the amount of money a church has after all donations and income have been accounted for, and after all expenses have been subtracted. In accounting terms, this is either a “profit” or a “loss.” 

Terminology is important here, since churches are not-for-profit organizations. As a not-for-profit, there are strict legal guidelines and laws that must be followed. Therefore, we need to be careful with the term “profit.” In this case, the more accurate term would be “net proceeds.” 

Let’s address each of these questions in order. 

Q1. Is it okay to have a surplus of money at the end of the year? 

The short answer is yes. Just because you’re a church doesn’t necessarily mean you can’t show a “profit” at the end of the year. 

A nonprofit can make a profit.  

But there are limits to what you can do with that profit. 

Your not-for-profit status impacts what you can do with the money that is left over. It ultimately it comes down to the purpose of your organization. 

A traditional for-profit organization makes money for its owners or shareholders. Profit is usually distributed to shareholders or put back into the business. 

On the other hand, a not-for-profit must have a “public or charitable” purpose. This means any end-of-year surplus should be used for a public or charitable purpose. 

What does this mean for you? As a church, you cannot distribute that money in any way to shareholders, investors or other people that may have a stake in the church.  

Pro tip: Just don’t give that money to individuals in any way at the end of the year. 

Q2. Should we plan to have money left over at the end of the year? 

You should absolutely have money in the bank at the end of the year. That is simply being a good steward of the resources God has given your church. Plus, it just makes smart financial sense.  

You want a financial cushion to prepare for the unexpected. This could be an unexpected expense, a downturn in giving or simply an unexpected opportunity. 

Q3. How much should a church plan to have left over after all expenses have been paid?

 The quick answer is it depends. 

There is no one-size-fits-all answer to this question. We’ve seen churches approach this question in a variety of ways. 

Some organizations take a very conservative budgeting approach. They intentionally plan to spend less than they anticipate they will receive in a given year.  

Other organizations budget based on what they received in the previous year. They then take whatever excess they receive from growth and allocate that money at the end of the year. 

Still others plan for an end-of-year giving campaign that they hope will bring the organization surplus at the end of the year. 

 I’ll give some more thoughts on this in a moment, but first, let’s discuss the last question. 

Q4. What should we do with this money? 

The answer to this question is also, it depends. Some churches allocate this surplus for specific needs within the church, some use it to establish savings and some use it to fund future ministry growth.   

Our advice is to strike a balance between savings and ministry. It’s always a good idea to save for a rainy day. In church life, you never know what the next week, month or even what tomorrow may bring. It’s fiscally responsible to have some margin in your accounts that allows for flexibility and financial security in the organization. 

It’s also good stewardship, however, to be able to distribute those funds to missions, local ministries or other ministry needs of the church. Does your church need some new equipment that perhaps you’ve been putting off? Does your facility need updates or improvements? Are you able to bring on some staff support or outsource some work that is causing you additional stress? 

However you choose to allocate these funds, the bigger point is that having a surplus at year end puts your church in a position where these decisions can be made. It gives you options. 

Let’s return for a moment to the previous question of how much to put aside. 

While it’s true that the exact amount depends on the circumstances of your church, there are a few principles that can guide us in this discussion. 

We’d contend that having too much left over at the end of the year means that you didn’t fully invest into your full ministry potential. Ultimately it comes back to the foundation of stewardship. We are called as churches to be wise stewards of the resources that God has entrusted to us.   

Stewardship involves both saving and investing. Good stewardship means that we’re using the resources to expand the mission of our church. It also means that we’re not putting our organization in a financially untenable position.  

If you want to learn more about how you can better steward of the resources God has provided your church, or you simply want to gain a better understanding of how to effectively manage church finances, sign up to receive free church finance, administration and growth tips delivered right to your inbox.  

If you’re ready to take the next step of taking the burden of managing your church finances off your plate, then let’s schedule a time to chat! We’ll show you how having a done-for-you financial management and accounting solution can help you and your church thrive! 

Church Budgeting 101

How to set up and audit your church budget

For many church leaders, the thought of building out a church budget can feel overwhelming. Maybe your church doesn’t currently have a budget. Perhaps you’re preparing to launch a new church plant or build a new building. Or maybe you just aren’t confident that your current church budget is working for you.

The good news is that building a church budget doesn’t have to be complicated. A budget is nothing more than a guide: A roadmap to how the church will allocate the resources they have been entrusted with in the upcoming year. In the next few minutes, I’ll walk you through the basics of building a church budget.

Why your church needs a budget

Once you learn how to create and maintain a budget that works for your church, you’ll discover that it’s an indespensible part of your ministry.

Don’t believe me? Here are a few things a well-defined budget can do for your church:

  • Answer questions about the mission and vision of your church
  • Set clear direction on how money will be spent and where the priorities of the church reside
  • Provide a filter for making spending decisions that may come up throughout the year
  • Offer a measure and benchmark to track the financial health of the organization
  • Set a standard to reflect and review throughout the year to make future ministry decisions

Getting started: Types of budgets

Most churches build a budget in one of two ways: 

  • Zero-based budgeting – What goes in, goes out

With this concept, you plan to spend everything you receive. Developing a budget is as simple as making an income projection, and then making a plan to spend the money that is received. 

  • P&L Budgeting – Plan to lose or plan to gain

Since we’re talking about churches, we can’t really talk in the true business sense of “profit and loss.” However, we can talk about planning for a loss or planning for a gain in a given year. Just because a church balance statement shows an excess (profit) at the end of the year, doesn’t mean the church is no longer a non-profit entity

Note: The danger with P&L budgeting is planning for a loss without a plan to cover. You can lose money on paper and still have cash flow. You might have money in reserves, investments, etc. However, you should always be aware of how much you are spending. Remember, a budget is NOT the same thing as a balance sheet. 

Budgeting basics: Income

The easiest way to start building your budget is to look at projected income. What sources are bringing you money? This includes tithes and offerings, but it could also interest, investments, facility rentals, dues, donations, etc. Once you’ve determined all your income sources, set a projected amount for each source. 

Are you on a growth track? If your organization has been around for a few years, hopefully you have some historical data to look at. Is your income trending up, down or staying stagnant?  

PRO TIP: If you haven’t jumped on board with mobile giving, now is the time. This is by far the easiest way to increase your income. According to Nonprofitssource (2018), “Churches that accept tithing online increase overall donations by 32%”

Budgeting basics: Expenses

Now that you’ve projected your income for the year, let’s look at common expenses. As I stated earlier, a budget can be as simple or as complicated as you want to make it. As your ministry develops and grows, the number of expense categories will also grow. 

Especially if you’re just starting out, it can be helpful to think about things in terms of “buckets.” What is the mission of your church? How can that mission be broken out into broad categories or “expense buckets”?

For this simple exercise, let’s start with three “buckets”:

GROW (Inside Church)

  • Ministries (children, youth, adults, worship, etc.)

GO (Outside Church)

  • Local Outreach (evangelism, events, etc.)
  • Missions 

OPERATIONS 

  • Personnel (salaries, benefits, etc.)
  • Administration (operating expenses)
  • Facilities and Equipment (maintenance, utilities, insurance, etc.)

Once you’ve established your categories, do your best to fill in projected expenses. Again, any historical date you have will help a ton here. 

Now what?

Now compare your projected income with your projected expenses. Do they match? Are there categories that need to be adjusted?

Now ask yourself the following questions:

  • Does the budget reflect the church’s priorities?
  • Are there areas where spending needs to be increased? Decreased?
  •  How does this budget align with the church’s growth goals?

Use these questions as a guide to make any necessary adjustments to your budget.

Ask for help when you need it

This is building a church budget in a nutshell. You can absolutely do it. But there are ways to maximize the effectiveness of your budget to help you grow a healthy church. And if budgeting isn’t you’re thing, it’s okay to ask for help. 

Here are a few ways to get the help you need:

  • Download our free 10-step Church Budgeting Checklist. Whether you’re putting together a budget for the first time, or simply looking to improve your budget, this will give you prompts to think through as you create your budget. 
  • If church finances aren’t you’re thing, we’re here to help. Our done-for-you church bookkeeping service will take away the guesswork and overwhelm out of managing your church finances properly. Get accurate monthly reports delivered straight to your inbox and peace of mind that you’re not making a costly financial mistake. Schedule a free demo today

The Procrastinating Pastors Guide to Annual Church Budget Planning

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We published last week the 3 Reasons Your Church Needs an Annual Budget and had some good responses from pastors that agreed, but wondered what were those next steps to getting their annual budget planned.

Today, we’ll give you 6 steps to Annual Church Budget Planning started. From these simple steps, you’ll have most of the framework in place to have an Annual Church Budget you can use for your ministry.

Step 1 – Review Last Year’s Church Budget

One of the best indicators of how you are spending and allocating your spending for your ministry is to look back at the historical patterns. Review this past year as a Profit and Loss statement. It will show you what you took in (income) and what you spent (expenses).

Look for any patterns. Also, look for any areas that have bigger numbers. When you look at yearly spending as a whole, over the entire period of time, you may get some surprises that you didn’t expect once things are put into perspective. Often, we’ll have churches that don’t realize what seemed like a small amount they were spending weekly, when added up over the year actually becomes a bigger percentage of budget than they expected.

Use these findings to decide if there are areas you need to focus or re-think how you’re allocating funds.
“Be honest here. If you’re spending $100 a week on donuts, and throwing out 2-3 dozen every week, it may be time to analyze or help your donut buyer plan better!”

Step 2 – Project your church year end financial

Ok, now we’re going to get into the nitty gritty of planning.

Since we’re not quite complete with the year, we’ll need to do some projecting of how things will end. The good news is if you’re reading this post in late November when it is published, we only have a few weeks left of the year so the projection will not be too hard. However, since you may be reading this at another time, we’ll show you a quick way to project.

Take your YTD Profit and Loss report for your church. This should show you what has been recorded as income and expenses so far this year. If you’re using Quickbooks, or hopefully our Simplify Church Bookkeeping System, this report will be pretty easy to produce.

If you can, export that report to Excel.

Once you have it in Excel, create a formula as follows =SUM (Col # / # of months in report) * 12. It will end up looking something like this: = SUM(B2/11) * 12

On the cell with your formula, grab the little square at the bottom right of the cell. Click and hold as you pull down so that you are highlighting all the way to the last row of the report. This is a quick way to duplicate the Excel formula you just made for all the rows.

What did we just produce?

This new column will be your End of Year projection on how you will finish the year. From this information, you can now start to project your Church Budget for the new year.

Step 3 – Analyze Year End and Plan the New Year

This is where the real planning begins.

Use the information you just produced and begin to think through your next year. I would re-color or highlight any numbers that are going to stay the same in the next year. This may be things like Rent, Subscriptions, Fees and other expenses that you are committed to or are vital to your ministry that you already know you will use in the next year.

PRO TIP : Add numbers into a third column in Excel so you have:
Column 1 – Real numbers produced from your Church Accounting Software
Column 2 – Projection from the equation you created in Step 2
Column 3 – Numbers we’ll enter as we create the next year’s Annual Church Budget

As you review line by line, think about those expenses that made up the numbers. Do they seem high? How does that line contribute to your ministry? Does that expense help you fulfill the Mission and Vision for your church?

Think through the spending of each line with those questions as a filter and use that to analyze what you’ve done so far.

As you complete your review, use Column 3 to put your final numbers for the next year’s church budget.

Step 4 – Get input from your ministry leadership team and key ministry leaders

Once you have a draft of the budget, which should be completed now in Column 3, share it with your ministry leaders. Get their input and thoughts.

If you have a staff, this is a good time to get their input into their ministry area and their plans for the new year. If we had more time, or had started this sooner, we could have had them draft their ministry area and then plan accordingly. Since we’re at crunch time, we can give each leader a primer for their decisions, and let them have input into the process.

Have a discussion with each leader about their area. Ask the same questions you considered in your preparation for the spending in their ministry area. The key here is to accept their input and get “buy in” from them. Let them feel a part of the process and understand why we have a budget, and how important good financial stewardship is to the success of the ministry.

If there are any adjustments that come up here in those discussions, adjust your budget at this point so you have a good, prepared final draft to present for approval.

Step 5 – Begin the preparations necessary to finalize and approve your annual church budget

If your church by-laws or constitution requires it, this is a good time to start scheduling whatever meeting is going to be appropriate for a vote on accepting this as the budget for your ministry.

It may also be required that a draft of the budget is required to have out for review to your membership as well. Get this information out soon as well so that people can be well informed. Having a well-planned and thoughtful budgeting process can help to alleviate some of the unnecessary headaches and drama that so often plagues ministries in this process.

Step 6 – Review the Church Budget Monthly and Quarterly in the New Year

Now that we’ve spent the time to prepare the budget, let’s really put on ministry on fire and use that planning throughout the year.

Each month or at least each quarter, do a review of your income and expenses against your budget.

PRO TIP: Simplify Church Bookkeeping clients get this report each month for a quick and easy review!

As you move throughout the new year, you will now have a financial road map for your church. You will find ministry decisions become easier (from a financial standpoint anyway) as you are able to look at things and plan against you expected annual church budget.

Hopefully you get a chance to start your budgeting process now. I’ve been in your shoes before and know as a pastor you wear many hats. If you’re like most, those hats that seem daunting, or you’re not exactly sure how to complete are the ones that get put on the back burner.

The steps I laid out here can be completed in just an hour or so. The analysis part make take a bit longer but it will only take a short time to get there. If you need some help, advice on your budget or want to get this off your plate completely by using our Simplify Church Bookkeeping System, Schedule a demo today.

Hey! We’re offering a webinar on Wednesday December 7, 2016 where we will go through these steps and I’ll show you exactly the steps I go through to create church budgets. If you’re interested, Register Here!

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