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EVERYTHING BUT PREACHING

How Do I Build a Budget for My Church?

By Dick Hardy

One of the most fundamental elements for a church is a well-planned budget. But how does that come together?

You might say, “I don’t even know where to start. We have never had a budget at our church.” That’s okay. Everyone has to start with his first budget.

Determining Your Income for Next Year

You might ask, “How can I know what our income will be?” If you follow these simple instructions, you will be amazed at how easily you can reasonably project your income.

Have your bookkeeper or accountant give you the Statements of Income from the last 3 years. If you don’t have a Statement of Income, have the bookkeeper total all the deposits into the church’s bank account for these 3 years. This includes all sources of income: tithes, building fund, missions, and designated special projects gifts. Lay the lists of each of these sources of income next to each other.

Look for the pleasant surprise

For the general or operation fund, the only monies you can budget are the undesignated tithes. For example, if the Statements of Income show that the church received $200,000 in tithes in 2007, $212,000 in 2008, and $220,000 in 2009, it might be reasonable to create a budget of $225,000 in 2010. Or, if you want to play it safe, budget $220,000 in 2010 to match your 2009 tithes. Never plan for an aggressive income in tithes based on expected growth or on the abnormally high giving year just completed. Project safely and conservatively. It is always a pleasant surprise to receive tithes in excess of your expectation.

In the example above, one way to do a precise calculation for 2010 is to evaluate the increase from 2007 to 2008 and from 2008 to 2009.

Do the same process for other funds. With other funds, however, you have more volatility because church members give as you present needs and as the life of the church demands. For example, people may have given heavily to the building fund in 2004, 2005, and 2006 because the church was building an addition to its facility. In 2007, giving dropped dramatically. Hence, do not use projections for 2008, 2009, or 2010 on any building fund giving in 2004, 2005, and 2006.

Be careful with missions budgets

Missions giving can be more static if the church has regularly scheduled missions conventions or efforts. It is best to error on the conservative side so the church does not overcommit to missionaries and/or projects. With missions, budget your expenses lower than your income. If you don’t, you will need to call missionaries and tell them you need to cut their support. How fun will that be?

Determining Your Expenses for Next Year

The expense side of the ledger is a different story. This is an area where a pastor may say, “I am clueless where to start.” That’s okay. Don’t worry. I can walk you through this as well.

Keep your expectations low

You may or may not come up with an expense budget that hits the mark in year 1 or even year 2 of this process. The important thing is to begin tracking where the money goes. In year 1 you have a lot of unknowns because you did not track prior to that year.

Have your bookkeeper do the following for our fictitious years 2007, 2008, and 2009. This is done to create our budget for 2010.

a. 2007 to 2008 calculates at [(87,000-80,000)/80,000] = 8.8 percent

b. 2008 to 2009 calculates at [(97,000-87,000)/87,000] = 11.5 percent

c. The average of the two: (8.8+11.5)/2 = 10.2 percent

d. For utilities, however, use the higher number: 11.5 percent

Contact your utility company to find out what their rates will be for the coming year. It may be better to calculate the amount of usage in each of these precious years and multiply it by the new rate. The same thing will apply in any other expense category where price hikes will affect your next year’s budget.

When income and expense projections are complete, you should show more income than expenses. If that is not the case, look at the expense budgets and start making reductions.

Do not adjust income projections upward. What you established as income is established. You need to reduce your expense items. Cut line items to reduce expenditures. In fact, you must do so to be fiscally responsible. Never set a budget with more expenses than income.

If you follow these guidelines for the next 2 years, you will begin to see an improvement in your ability to control expenses, reduce debt, and improve savings. Your first year will be hit and miss. The second year will start to be predictable. In year 3, you will be good to go. These are good things to happen for your church.

God wants us to manage our money well. Setting a basic well-planned budget does just that.

DICK HARDY is founder and president of The Hardy Group, a pastoral leadership consulting firm for lead pastors. Contact Dick at dhardy@thehardygroup.org or visit the website www.thehardygroup.org.

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