For some reason QuickBooks just doesn’t seem to value budgets. There’s like ten different Profit & Loss reports, four different Balance Sheets, and only one Budget to Actuals Report. The budget tool itself is barely usable. This kind of ticks me off. The reason I’m complaining so much is that the budget can be one of the most tangibly transformative tools in a church leader’s arsenal.You’ve likely heard it said, “where your treasure is, there your heart will be also.” This is not just descriptive. It’s a promise. So…it’s likely true that I can tell what’s important to your church by looking at your budget and spending. By changing your budget, you can change what your church sees as important.
Enough soapbox. In the video I show you where QuickBooks hides their budget tool. One of the things I’ve found important in my own life and in some of the committees I’ve served is making mid-year projections on how the year will likely end. Many churches set their budget in the fourth quarter of the previous year. The Finance Committee does this with the best information they have at the time. By mid-year, they have even better information. Take this year for example. Most of my churches in the Dakotas are way underbudget for snow removal and mowing but are overbudget on utilities. Giving may be up or down. Many had unexpected income from either the government or the denomination or bequests. That’s a lot of moving parts to keep track of. Making a projection is like being able to update the budget with all the current data.
What I prefer to do is update my projections quarterly. This gives leaders enough data than to lead more confidently. If we project finances are doing poorly, we can look into reducing expenses. If we project that finances are doing great, we can be more open to spending money on unexpected opportunities…or even just putting it into savings.
I’m pretty skeptical of most of the practical advice I see in the Book of Discipline. I have a hard time imagining that any good and timely advice could come from a group of 900 people meeting every four years where many of them seem to have a political agenda. Whether the advice was an accident or on purpose, the Discipline has some golden advice for budgeting.
So here’s the advice in short:
Only budget what you are willing to fundraise: It’s easy and common to set a budget an unrealistic amount…and call it faith. Faith and works go hand in hand. Before you approve a budget, ask yourself, “Am I willing to put in the work to fund this budget?”
People support what they create: Do all you can to involve others. When committees and staff create the budget, they will be more likely to own it. You either put in the time in helping them create it or you put in the time nagging them to follow it.
A budget is a plan, not a prediction: I’m used to creating a budget and then making notes on why certain lines are way over or under. Why not periodically amend the budget as allowed by the Discipline? If you take a fresh look at the budget every three months, you’ll be three months smarter and end up with a much better plan going into the end of the year. This works really well when you are breaking down your budget by month or quarter.
It’s pretty much a given that church employees are paid less than non-church employees, right? Partially that’s because the intangible benefits of working for a church can be pretty great. Usually there is a lot of flexibility. There is the fulfillment knowing your job is transforming lives and giving people an assurance of heaven. Is there a point where you are paying a church employee too little?
When I worked for Bismarck First Church, this was a struggle. What is the going rate for a youth pastor or church secretary? I was fortunate enough to run across Richard Hammar’s Compensation Survey. That gave me some data to help make that judgment. The next struggle: What do you do if you are overpaying or underpaying a church employee? I dive into what I would recommend in the video below. Also, in the links at the bottom I share a couple of affordable training opportunities that I’ve found helpful over the years.
About eight months ago, I called into the Dave Ramsey Show and got through. After I quit gushing over Dave, I asked him, “What would be the Baby Steps for a church?” This was not just a passing fancy of mine. I’ve been thinking and reading and visiting with people about this subject for many years. In this quarter’s webinar, Sheri Meister and I discuss the seven areas that church’s need to give attention if they want financial freedom to follow Jesus Christ.
Here’s the short version of the areas. I encourage you to watch/listen to this webinar to get the long version. Plus, there is a link to the assessment below that you can take for your church:
Invested Leaders: Church leaders should be raised up from the top 20% of givers. Leaders that don’t give worry about what others might think. Leaders that give worry about the mission.
A Focused Team: Now that you have Invested Leaders, the next step is to help them take responsibility for Overseeing Spending, Growing Giving, and Managing Reserve Funds.
Stewardship Teaching: Money can be either a great obstacle to living for Jesus or a great tool. If you help people manage their money and teach on the benefits of giving, church income will go up.
Budget Accuracy: With a growing income, now is the time to be honest about your budget. How will you plan to spend the income…not what you wish the income was.
Debt Aversion: Debt is a weight on the ministry of a church. It will affect how you lead and make decisions. The sooner you can rid yourself of the debt, the better.
Capital Reserve: With the Debt gone, a Growing Income, and an Accurate Budget, it’s time to build up reserves to care for the property. This helps you avoid always raising funds for the building so that people begin to think the building IS the ministry.
Operating Reserve: At the same time, building up an Emergency/Opportunity Fund will help you take risks and weather storms.
Gallup did a poll some years back and found that 33% of households kept a formal budget.The adopting and living by a budget is really the first step for anyone wanting to feel more secure in their finances. The same is true for the church. While the vast majority of churches adopt a budget, few live by that budget.Why is that? Because most of them adopt a bad budget. The budget is usually unrealistic, doesn’t support the church’s vision, and feels like a waste of effort.
In our work with churches, Sheri Meister and I have identified three principles that will change the way you budget.
Know your bottom line: You’re not the Federal Government so you can’t spend money you don’t have.
Include your long-term goals: You should be looking forward to more than just surviving the year.
Tell your story in numbers AND words: Go through the exercise of creating a narrative budget.
The first two will honestly be the most difficult and bring the most resistance. You will have to push forward because your church’s financial future depends on it.
As an accountant, I love a line item budget. It speaks to me as clearly as a short story, but I’m in the minority. The vast majority of people need to hear the story in order to understand the budget. They don’t need more numbers. How do you transform your budget into a meaningful story about how your church is and is planning to impact this world? That’s what I walk you through in this video.
A narrative budget is a lot of work. Is it worth it? If a narrative budget helps you align your budget to your mission and helps your congregants see how their giving is making a difference, what is that worth? That’s like hiring a leadership consultant mixed with a capital campaign consultant which would normally costs thousands.
Sometimes church are criticized for having so much of their budget go for personnel, buildings, and administration. Sometimes church leaders (and especially the pastor) feel guilty about this too. On average, about 80% of a church’s budget goes towards these things. Church budgets rarely include estimates for designated giving although churches plan on and depend on designated gifts for youth activities and to support missionaries and to feed the hungry. Why not include designated gifts in the budget? It’ll make your church’s budget look better and may more accurately show your ministry strategy.