Fuel for the fire
Setting a budget for your church
Why your budget matters
Budgeting doesn’t top many people’s lists of favorite activities. But a budget is a crucial document for your church, and budget setting - done well - can be an insightful and empowering process for you and your team. Budgeting is simply making decisions - about what you will and won’t do, about what is a priority and what is not. Like any good plan, it provides clarity on what is happening and confidence to move forward.
A good budget reads like a manifesto - a concise message about what you really care about. But too often we see budgets that read like a history book - a long chronicle of pet projects, decisions made in different times, and subscriptions you forgot you signed up to.
Finding your way out of that can sometimes feel daunting. It’s certainly no fun to sit staring at a page of numbers with no clear meaning. But we break it down into clear steps that not only build towards a clear financial plan for your year - but also serve as an important process of review and direction setting for your ministry. It is an investment of time, but one that will pay off throughout the year, and beyond. A clear and well made budget will empower your team to run, focus your organisation, cut out waste, and save you from bottlenecks and decision fatigue.
How to set your budget
Staep 1: Clarity - finding the right ‘buckets’
The first step, before jumping into the numbers, is to make sure your chart of accounts is clear. These accounts, or budget lines, are the ‘buckets’ of income and expenses that you will budget within and track and report against. This is important because without the right framework to break down the numbers, a budget will be meaningless. In order to make any decision of how much you will spend, you first need to define what you are spending on.
A good chart of accounts should be:
Simple - as simple as you can make it without losing important detail. The number of accounts you have will depend on the complexity of your operations, but for most churches this should be around 30-40 lines. Your chart of accounts should be simple to read and simple to use - with account names that are clear and self-explanatory, and a structure that is mutually exclusive and collectively exhaustive - i.e. avoids gaps and overlaps.
Relevant - a reflection of your activity as a church. Where there is disconnect between accountant and ministry, the result will usually be accounts that are structured around things - for example, grouping together all catering or venues. This certainly makes it easy for a bookkeeper to categorise receipts - but more useful to you as a pastor are accounts based on your ministries - for example, youth or small groups. Your budget needs to serve you - to give you a clear view of how much you are putting into different priorities.
Aligned - matched to your leadership structure of and key roles within your team. A budget line with multiple owners is a recipe for overspending, confusion, and conflict. Each of your accounts should have a clear owner that is accountable for managing it. This is not just so you can police overspending - it is a form of empowerment for your team. It gives them clarity on what resources they have available and where the boundaries of their responsibilities lie.
Step 2: Review - reflecting on what is working, and what is not
The most common method for setting a budget is to simply to hit copy and paste from the year before. It’s easy, and in theory it was all discussed and approved at some point - so if it ain’t broke, why fix it? But repeating this year after year will leave us with a budget that is out of date, and ultimately impeding our vision. Most likely it will be both overcrowded and underfunded - like a junk drawer too full of old manuals and broken headphones to fit batteries or plasters. Looking at the year past is a useful benchmark and and gives us a starting point - but it’s not enough.
Budget setting is a great point to stop, reflect on the year behind, and ask ourselves:
Are we happy with what we did this year - and the results we got?
Was there anything we spent time or money on that didn’t really make a difference?
Are there things we are doing just because we have always done them?
Are there areas where we could have achieved the same results for less money?
Are there things we believe in and want to do - but we haven’t for lack of budget?
Step 3: Priorities - deciding what really matters
Every dollar has an opportunity cost. The parable of the talents makes it clear that our burden of stewardship is not simply to avoid waste, but to sow wisely and multiply. Most likely, what is on your wishlist far exceeds what is in your wallet. There is no shortage of ‘good’ things a church could spend time and money on. But there will also be a crucial few - the 20% of input that leads to the 80% of results, the key things that really make a difference for your church. The budget process gives a opportunity to have a robust discussion with your core staff or leadership team to identify what those are - to decide what really matters to your church.
This will involve considering each budget line - which based on step 1 should now neatly align to our activity - and identify what is muscle, and what is fat. Go through each line and label it as essential, important, and optional.
If you are facing down a deficit, this makes it pretty clear what is on the chopping block. If you are looking to generate a surplus for buildings or other future goals, this gives you an idea of what you could save if you spent only on the essential. This is not an easy exercise, but it is a worthwhile one. We can only make space for our vision by identifying things that are distracting from or diluting it.
Step 4: Communication - putting it to use
Finally, you need to actually use your budget. It will have no value as a document that just sits on a shelf. The budget needs to be clear and visible to those responsible for outworking it, and it needs to be meaningful - if it is not followed, there is consistent feedback and follow up.
Communication. After step 1, your budget lines should be neatly aligned to your roles within the org chart. But people can’t stick to a plan that they don’t know about - so if your leaders haven’t been part of the process, you will need to communicate clearly the decisions that have been made and what it means for their area of responsibility. This isn’t just about setting boundaries but also empowering them to maximize what they have been given. When the lines are clear, there can be genuine ownership. Don’t keep your expectations of people secret - help break down what it might look like on a quarterly, monthly, or weekly basis so your team has clarity.
Accountability. Your budget is something that should be visible and used each month. Regular reporting, on at least a monthly basis, means that you can see quickly - and course correct - when things are not going according to plan. Make sure that your budget line owners are getting quick and clear feedback when there is overspend. Work together to understand why that is, and what needs to change.
Decision making. A year is a long time, and it’s very unlikely that you’ve gotten everything exactly right in the budget. Unexpected events, forgotten expenses, or new opportunities will undoubtedly appear throughout the year. Have a clear and consistent process for deciding budget increases or changes, and try to limit these to monthly or quarterly decisions to avoid a silent but deadly ‘creep’ into your bottom line. Set clear limits of how much each person is empowered to spend out of the approved budget, and what level needs to be escalated up the chain, all the way to the board. Building in these checkpoints means that you continue to make intentional decisions about your budget, and therefore your activity - not the other way around.
What next
Budget setting can serve as a key point of discussion and decision making about the priorities of your church. Going through the process methodically will not just provide you with a plan for your money but a plan for your church. We can help you to navigate budget setting - bringing a steady hand to help guide you through strategic discussion to detailed forecasting, along with tools, templates, and plans to make the process as easy as possible.
