Having a set budget is a useful feature for a church or non-profit organization. A budget is an important metric for evaluating the annual performance of church activities. A budget also empowers workers to act somewhat autonomously as long as they stay within budget limits.
Setting a budget for the first time can be challenging. At first, it may seem that not even enough money is coming in to bother with such a plan. In fact, managing small amounts of money can be very useful. Over time, as your budget structure grows, so does the freedom that comes from having a structured spending plan.
So where do you start building a budget? If the church has any history of past spending, that is often the best place to start. If there are several years of spending history, that’s even better. With a year of history, there may be spending anomalies, such as one-time purchases or emergencies that will not recur from year to year. With several years of history, expenses can be averaged and the probability of normal spending habits should be easy to establish.
Start with a month-to-month spending pattern. Evaluate recurring expenses. They are often the “fixed costs” of an organization. Salaries, utilities, regular maintenance, office supplies, and scheduled events often fall into these categories. Most often, these costs represent ninety percent of the organization’s spending. The remaining portion of the expense can go to one-time purchases, replacement of old equipment, taking advantage of new opportunities, and increases in wages and maintenance. Obviously, there is not much money available for these items. Therefore, a multi-year spending plan should be considered in new purchases and salary increases.
If a chart of accounts exists, each parent item in the chart of accounts can be assigned a budget amount. If a list does not exist, it is generally a good idea to create a complete list of expense accounts or categories and then assign a dollar amount to each item on the list.
Once the budgeted figures are in place, a periodic review of actual vs. budgeted expenses may occur. It often happens that spending is sometimes done faster or slower than the budget timeframe. In a review, it’s good to compare actual spending to a year-to-date budget. In this way, if the expense is less than anticipated, money can be set aside to meet the known budget amounts that will occur before the end of the year.
A budget is an important tool for running a church or organization efficiently. Helps to keep control of expenses. Empowers workers to work independently. It also provides a metric of how efficiently the organization is running.