Preparing a budget for your church can give you the confidence to support its mission and ministry, to care for its buildings, and to love your community.
While this may seem far-fetched, having the knowledge of what you can and cannot afford will help you to plan ahead with buildings works, with knowing what projects you are able to start and how you can build up a Kingdom people in your community.
We see examples of budgeting as a virtue and aspect of wisdom within the Bible, in Proverbs 31 the description of a good wife includes managing the house's resources, and in Luke 14, when talking about the cost of discipleship, Jesus refers to the wisdom of budgeting for a building project and the folly of not doing so.
There are several approaches to budgeting and you may find the NCVO website helpful. We are going to look at three approaches, which you might find helpful for your church: income-driven, expenditure-driven and zero-based; though there are a number of other methods, and all have advantages and disadvantages.
Approaches to Budgeting
Income Driven Budgeting
Income driven budgeting is when you work out your expected income and so try to make your expenditure fit into that amount. It might be that you know that you are going to be getting a fixed grant of £5,000 for Messy Church, and so the budget becomes income-driven and you try to ensure that the expenditure is £5,000 or less.
We see this in the Bible with the story of Joseph in Genesis 41, where Joseph interprets the Pharoah's dream. Through the interpretation they learn that there will be 7 years of plenty followed by 7 years of famine, and so they budget that 20% of the resources from the years of plenty will be put aside in order to prepare them for the years of famine. (This also demonstrates the importance of reserves!). The knowledge that their income will increase and then decrease was the defining factor in their decisions, and so the expenditure in the first 7 years was decreased in order to put some food away for the future.
Expenditure Driven Budgeting
Expenditure driven budgeting is when you work out your expected costs and so try to make your income fit into that amount. It might be that you are wanting to repair your roof, which you discover will cost £20,000, and so the budget becomes expenditure-driven and you try to ensure that the income for the project is £20,000 or more.
We see this in the Bible with the story of Noah in Genesis 6, where Noah is ordered by God to build an ark of certain dimensions. As the ark is to have at least one pair of every animal, bird and and creeping thing, Noah will need to make sure that the ark is a certain size to fit them all in, and so the size of the ark (income) is driven by the number of animals (expenditure). Likewise, if we know we have to keep two elephants in hay to eat for 40 days and 40 nights (plus the time for the floods to decrease) - our expenditure - we can therefore work out how much hay we need to bring in.
The Ministry Share Scheme is another exmaple of an expenditure driven budget for the Diocese. Here we know the cost of ministry for each Minister, and so we need to make sure the income is equal to this amount, either through income we are already expecting, or through the Ministry Share request.
Zero Based Budgeting
This is often used by larger businesses and charities and works on the basis that each penny that comes in is budgeted to go out (or put aside as reserves). It can be particularly helpful when you are trying to consider where you might be able to reduce the budget for some expenditures, and is often suggested for individuals when they are trying to save or reduce debts.
In most cases, you may need a mix of approaches depending on your situations and the projects you want to undertake. There will be some projects that you know will require a certain amount to keep them running, and so you will need to look towards where income can be found, and there will be some projects where you know your income is static, and so need to amend your expenditure.
Putting together a Budget
Putting together a budget can be very simple, and for the general running of your church it may not differ much year from year, however, especially when you are looking to do a big project, a more detailed budget will be helpful. Below we have put together a simple method for developing a budget, however, you may want to use a different apporach (such as zero-based budgeting), which would use different steps.
For your annual budget, it may be helpful to plan this in October and November, a little before your financial year end. This means that you should have enough information to have a good idea of where you will be at the year end, what you income and expenditure were for this year and what demands you will have in the next year.
Preparing your Budget
Step 1: Pray
The first stage to preparing your budget is to pray. Spend some time with God thanking Him for all that you have received over the past year, and offering Him your plans for the next. Think about some of the Bible passages where Jesus talks about money and planning and how these can realte to your church.
You may like to look at:
Step 2: Collect Information about the past
The next step is to gather information about the past few years (it would help to have at least one, but three complete years is really helpful). From this you can set up a table of how much was raised or spent through each category. For example you can see whether heating and lighting has increased, decreased or remained mostly flat. To make this easier you could use the same categories as you find in your accounts or on any accounting software that you use.
Step 3: Calculate information for the current year
You should also be able to gather 9 months' data for the current year. This can then be used to predict the figures for the full year.
Go through each category and find the figure for the end of September, then divide this by 3 and multiply by 4 and this should be a rough estimate for the year.
Then look through each category again and see if you know anything more that would change that category. For example, you may have a big Christmas Tree festival, which increases your fundraising total dramatically in the final month, and so 'fundraising' can be predicted to be higher than previously calculated. Likewise, you might have paid all your Ministry Share already, and so you know you will not be paying any more in the final three months.
Step 4: Predict information for the coming year
Now you know what you received for the past few years and have calculated for this year, you can start looking at the future. In general, it is best to expect expenditure to increase slightly, and for income to decrease slightly. This can give you some rough figures.
The next thing is to speak with the other groups in the Church to see what they are expecting, the fabric committee may be wanting to replace the hot water boiler, the Youth group may be wanting to send a minibus to a local Christian festival, you may be looking at doing a stewardship campaign. Finding out what you want to achieve over the next year as a church will help direct the budget. You might also have other documents which will help in predicting this information, such as a quinquennial inspection, which shows what needs to be done to the fabric of the building, or a Mission Action Plan (MAP), which highlights the areas you want to focus on in your ministry.
Hopefully, following this stage you will have a budget with an income slightly greater than your expenditure, but if not you need to start talking to the various groups in the next Step.
Step 5: Negotiating your budget
If your budget does not lead to a surplus, you will need to chat with the various groups to see if they can pull back on any of their plans, or find additional sources of income. This can be tricky and should definitely be done with your incumbent, so that they can hold the bigger picture and direction of the church.
The other option would be to dip into your reserves, which may be necessary in special circumstances, but this is not a long term solution, and should only be done when necessary.
You may also want to contact Chris Boden, the Diocesan Stewardship Officer, to get some advice as to where you might be able to make additional savings or find revenues.
Step 6: Approving your budget
Now you have a completed budget you need to get it apporved by your PCC. This is important to ensure that your whole PCC, and so the whole congregation, take ownership and responsibility for it.
Step 7: Using and communicating your budget
Now you have an approved budget you need to communicate this to the congregation. This is important for a number of reasons: it gives the congregation confidence that you are caring for their donations; it helps the congregation feel a sense of ownership over the church's finances, it raises awareness of any financial difficulties, which may mean they are able to reassess their own giving and help with the problem.
You may want to add something to your website about the budget, and produce a poster for in the church. You may also want to put something in your newsletter.
Your budget should be a living document to help you with your finances. You can use it to mark where you should be and where you actually are and where more work needs to be done.
Looking to the future
Once you have completed your annual budget, you might want to look further ahead, especially if you have any big projects in mind.
The Quinquennial Inspection should highlight what the needs of the fabric of your building will be over the next few years and give an estimate as to how much this will cost.
The Mission Action Plan should highlight what the needs of the community of the church are and where you are looking to focus the church's ministry.