Pullquote: Ask yourself exactly what it is you want to do next year. Is it the same as this year? Or, do you want to launch off in another ministry direction? The best way to fund new projects is to first determine how much it costs to keep the church running at its most basic level.

Pullquote: Don’t allow the church budget to be the last word, to be chiseled in stone, for 12 months. It may be necessary to make changes due to changing events or opportunities.

Pullquote: Don’t fall into the age-old approach of taking last year’s budget and automatically adding a percentage increase. Too often, this is done without determining if last year’s funds were being used as effectively as possible.

The process of budgeting in a church setting is often viewed negatively. Either it’s an unpleasant experience—not unlike a root canal!—or it’s a traditional ordeal, performed the same way each and every year. After all, we’ve always done it that way.

Budgeting can be a positive experience. The best approach is to view it as an opportunity to establish church goals. Then, decide how to fund those objectives.

The traditional method is to prepare a budget based on last year’s activity first and then go back and make adjustments and additions. Move away from this approach by answering three basic questions:

1. Where have we been?
Past giving patterns are important to get a handle on what funds are available to provide for the church’s goals. Historic information, which consists of both past income and expense figures, can reveal:

* Previous trends related to spending
* Special giving appeals
* General giving trends
* Costs of various ministry thrusts like building programs and mission programs
* Mission emphasis

Will past trends continue? Or, will new trends develop? You will need to apply current information to the historic information to project future financial patterns.

You have to do your homework to get this information, but it is important to establish budget goals. Where should you look? Most of this information should be in the general ledger or cash receipts and disbursements journals.

2. Where are we now?
Budgets are projections and plans expressed in numbers. They are future needs with figures wrapped around them.

Look at your church’s current financial structure. All expenses should be broken down into various divisions by either area of ministry (worship, missions, administrative overhead) or by departments (youth, music, education and so on).

Within these categories, line items should be established. These are nothing more than individual expense categories. For example, in the Christian Education area, you would generally have line items for curriculum and supplies.

The best way is to budget both income and expenses for these departments. This will allow you to track funds such as registration fees for a Christmas banquet as they are received. It will also permit you to determine the true costs of activities and ministries. It will help you answer questions such as:

* Did the church pick up any of the costs of the banquet?
* Did the youth group trip to the mountains break even or was it subsidized with church funds?

The first steps in preparing a budget are to:

* Determine past giving and spending activity.
* Set up a church financial structure into departments and income and expense line items.

3. Where are we going?
The final step is to make projections based on church goals and desire. Church leaders should ask themselves exactly what it is they want to do next year. Is it the same as this year? Or, do you want to launch off in another ministry direction?

Here’s a good tip. The best way to fund new projects is to first determine how much it costs to keep the church running at its most basic level.

Secular businesses call this setting fixed costs. What does it take to keep the doors open? Once your basic costs are determined, you then begin to build from that point. Keep asking questions. Should we fund the music program at its same level? Do we need any new audio-visual equipment for the Sunday school? Can we afford both an enhanced music emphasis and yet buy this equipment? Can we afford both or which is more important?

This process of building from the bottom up will force budgeting decisions to follow the goals and priorities of the church. Otherwise, you could fall into the age-old approach of taking last year’s budget and automatically adding a percentage increase. Too often, this is done without determining if last year’s funds were being used as effectively as possible.

Inquiring minds want to know. Your congregation will usually want to be made aware of certain key points in the church budget. Frequently asked questions include:

* What was our giving last year?
* What was last year’s budget?
* Did we accomplish the projections or miss them? By how much?
* What is the projected giving for the new budget year?
* What is the new budget?
* What are the major categories?
* Do the leaders reasonably expect us to achieve this goal?

Important: Don’t allow the church budget to be the last word, to be chiseled in stone, for 12 months. It may be necessary to make changes due to changing events or opportunities. Don’t allow the ministry of the church to become a slave of the numbers in the budget.

If you need to move some of the line-items around within the budget, do it. That is not to say you should “trash” the budget whenever things change, because there still needs to be a certain amount of discipline involved.

The simplest and most effective approach is to start with a fundamental approach. Plan first. Budget second!

David Pollock is the director of Resource Ministries, Inc., www.resourceministries.net.