21 Feb Church Budgeting 101: Tips for Developing and Following a Budget
Every responsible, well-run organization needs to plan and follow a budget. This includes churches and other charitable organizations and nonprofits.
Budgets are essential to churches for a few reasons. First and foremost, financial health is foundational to carrying out your ministry. If you can’t continue to pay rent, payroll, and other essential expenses, you will cease to exist. Second, your budget is a planning tool that forecasts both revenue and expenses. Your operations depend on both. Third, a solid budget allows for transparency and demonstrates good faith. Leadership and members alike should be given easy access to your budget so that everyone is on the same page. Your budget helps hold your church accountable and ensures funds are being managed as effectively and ethically as possible.
To help your church save like a pro, here is a short guide that outlines some simple tips for developing and following a budget.
Invest in Church Budget Software
Before opening up an Excel spreadsheet and trying to create a budget that way, it might be smart to think about investing in software for church finances. Savings software can save you a lot of time and manual book work. Some programs even sync with your bank accounts to automatically track income and report your expenses.
One tool that can be very helpful for smaller churches is QuickBooks. The simplicity of QuickBooks and its capacity to unlock more features as you go make it a great option.
If you’re giving online, mobile Axept’s administrator portal lets you see donations in real time. This helps you keep a close watch on recuring donations and any revenue fluctuations, surpluses, or shortfalls and plan accordingly. You can learn more about how mobileAxept can help your church management here!
In addition to QuickBooks, here are some other fantastic church saving tools for your consideration as well as some tips for making sure that you choose the perfect solution for your church!
Aplos – Aplos embodies the “all-in-one” approach that helps to simplify and centralize your essential financial and church management functions. With its 15-day free trial, you can test out the tool to see if it’s right for your church before committing. In addition to financial and management functionality, Aplos will also help out with member management and conveying messages.
Financial Edge NXT – Churches must have all their ducks in a row when it comes to their finances, as they tend to be held to a higher standard than businesses. Failure to comply with standards can lead to distrust among members. Financial Edge NXT works towards ensuring compliance while allowing churches to grow and make smart financial decisions.
Sage Intacct – Sage Intacct is committed to assisting churches grow their influence, increase their funding, and carry out their mission with smart financial decisions. Their financial tool is highly rated and should be considered by any church looking to expand its audience while remaining careful with how they spend their money. With automated processes and reporting tools that allow for complete transparency, Sage Intacct is one of the top church savings tools out there.
Martus Solutions – Martus offers a great budgeting tool for churches that integrates exceptionally well with many different financial systems. For example, if you’re keen on trying QuickBooks, you can also implement Martus, and they’ll work together seamlessly. This budget solution integrates with QuickBooks, Financial Edge, ACS, Intacct, and other systems.
ACS – ACS is a fantastic church savings tool that will help you make smart, informed decisions on managing your funds. But it does much more than that. Churches should also consider using ACS because it can assist with organizing events, staff, volunteers, schedules, and so much more.
ChurchPro – As the name suggests, ChurchPro was specifically designed for churches. For the most part, you can easily work with a budgeting software that isn’t explicitly for churches, but sometimes it’s nice to have one that was crafted for your niche. With ChurchPro, you can manage payroll, attendance, membership, inventory, and contributions, along with other key areas of your church.
Make Sure Your Budget Reflects Your Priorities
As you begin to create a budget, focus on the priorities and goals that you have established for your organization for the coming year.
One helpful practice is writing out your goals and prioritizing them in order of importance to your leadership and congregation. Some examples might be to become debt-free, build a new playground for the kids, or update lighting. Essentially what you’re trying to do is get everything out in front of you and allocate funding based on importance to your operations and mission.
Include Projected Income and Expenses
While putting together church savings, it’s good to look back at giving records from previous years, but it’s also critical to project income for the next year. In other words, when you’re budgeting, don’t lean entirely on the past but instead continue to push for a brighter future. A simple way to project future income is by taking the past three years’ income statements and finding the mean increase or decrease in financial income. By doing this, you can plan based on both the average increase and decrease.
This same principle can and should be applied to spending. There may be significant expenses from time to time that fall outside of the general budget, but in the end, spending should still average out year to year based on attendance, income, and staffing.
When you project income for the year, you can break it down by each month and quarter. This way, when you see what you’re receiving on a weekly or monthly basis, you’re able to compare it against what you’ve projected. By using this method, you’ll be able to see trends in giving and other sources of income, which can help with future budgeting and understanding cash flow.
Prepare For a Random Drop in Income
Budgeting for a church is always going to be variable based on the income that comes in. On any given month, a church can experience a sudden drop in giving. It can be possible to plan for these as they often happen around summer holidays or when people are traveling. Preparing in advance for the “Summer Slump,” for example, will help set you up for success.
Plan for Regular and Recurring Costs
Recurring costs range from things as simple as toilet paper, lightbulbs, and diapers for the nursery on up to larger expenses like salaries, rent or mortgage, and insurance. Setting aside money every month to meet these needs for your organization is going to help prepare you for drops in income and unexpected costs.
Leverage Online and Mobile Giving
Advising for online and giving via mobile helps to keep incoming donations from fluctuating between seasons and when people are traveling. Giving online allows donors to give from wherever they are and set up recurring gifts so that they don’t have to think about whether or not they’re staying consistent. If you’ve seen a fluctuation in income due to seasons changing, then we’d love it if you would look into our mobile and giving online program, GiveNow.
Build an Emergency Fund
Just as in budgeting for personal finances, an emergency fund is crucial in tight situations when money comes up short, large or unexpected costs arise, or regular givers lose their jobs unexpectedly and aren’t able to give.
According to most financial experts, an ideal amount in your church’s emergency fund would be six months’ worth of income. While this might seem like a large sum of money to set aside, the security of having those funds in the bank will help your organization be prepared for anything.
For more information or to get started, contact sales.