Planning an Effective Church Budget: Budget Approved, Now What?

effective church budget

A guest blog from the accounting team at PSK.

4 Strategies for Following Through

1. Have a strong platform in place that includes:

+ A chart of accounts, or a list of the church’s general ledger accounts used to generate financial statements (This should be an exact replica of the church budget.)

+ Timely financial statements that include results of activities and a budget vs. actual comparison

+ A budget breakdown that incorporates the year’s giving/spending trends

+ Ideally, designated/restricted gift activity

2. Keep an eye on revenues and trends, so any shortfalls can be addressed quickly.

Revenues include:

+ Tithes and offerings

+ Service revenues (Day care, school, book store, etc.)

+ Special events

+ Investments/endowments

Help identify trends by asking these questions:

+ Is income increasing, decreasing, or plateaued?

+ Are a significant number of members joining or leaving the congregation?

+ How is the local economy doing? Are any layoffs on the horizon?

+ What is the demographic make-up of your church? What did it look like three years ago?

3. Control expenses with a formal bill-paying and approval system.

A strong bill-paying system must clearly document:

+ Who authorized the purchase of goods or services

+ Who received the goods and compared them to the original order

+ Who compares the invoice with the authorization

+ Who prepared, signed, and mailed the check

+ Who recorded the transaction in the general ledger

4. Develop a monthly cash budget. Some months, it’s common for cash outflow to exceed inflow. (July and August, for example) Develop a “budget within a budget” to avoid paying bills late, borrowing money, or dipping into alternate accounts. Use historical data to:

+ Estimate the next month’s giving receipts and expenses.

+ Compare the net amount to cash on hand.

+ Make adjustments as necessary based on the shortfall amount.

Remember … There is no one right way to do a church budget. A church’s mission and vision will impact its financial
planning. Our hope is that these suggestions will help point your team in the right direction for your ministry.

For additional church management resources, click here.