10 Tips For A Better Budget Season
As budget season approaches, it's crucial for finance and staff leaders to prepare for the upcoming year by carefully reviewing past trends, evaluating compensation, and gathering comprehensive data. This process sets the foundation for a thoughtful and strategic budget that meets the needs of your congregation while aligning with your ministry's goals. In this blog post, we’ll share ten essential tips to guide you through budget planning, from establishing a clear timeline to effective communication with your members. By following these steps, you can create a budget that reflects your church’s priorities and fosters a culture of transparency and collaboration.
Plan the Process - Finance and staff leaders should carefully consider the budgeting process and establish key meeting dates and deadlines. Ensure that you give your team ample time to plan and adjust to the new budget. Once you've established these key dates and deadlines, we have provided a sample budget process timeline to assist with this (LINK).
Review 2024 Trends - Begin gathering data on 2024 giving and expenses. This information will aid in projecting your 2025 budget. Most churches should have at least nine months' worth of data for 2024. With this data, you can calculate your average monthly giving and expenses, both of which are essential for planning the new budget.
Evaluate Compensation - Your finance team should start evaluating compensation for 2025 and determine how it aligns with the overall projected giving. Consider each layer of employees and the raises that may be necessary. We also recommend conducting a compensation study every three to four years to ensure that your staff salaries are in line with your church's budget.
Insurance Renewals - When projecting costs for the new budget year, consider your new insurance rates. The primary insurance needs for churches include Health, Life, Building (if applicable), and Liability. If you plan to shop around for the best rates, now is the time to do so. Should you need assistance with insurance or retirement plans, feel free to reach out to ChurchBiz HR (LINK).
Communication - Once your budget is finalized, we recommend sharing a high-level summary with your congregation. This can be done at a member's meeting or through email communication. By doing this, you help your church understand the hard work your team has put into budgeting and convey the giving needs for the upcoming year.
Review Your Chart of Accounts - Every couple of years, it's a good idea to evaluate your church's chart of accounts. Are there old accounts that need to be archived? Are there accounts that are too broad and need to be broken down into more specific accounts? Is your chart of accounts organized so that your budget can be viewed at a high-level summary of major cost areas and expand to the level of detail you need? Lastly, does your budget reflect your present ministry priorities and reflect the stated values of your ministry? These are all important questions to consider before building out the next year's budget. You can find a sample chart of accounts in our budget templates (located in our Church Finance Resource library).
Detail All Payroll Updates - For the sake of budgeting, you will need to know the compensation changes and add those totals into the appropriate budget categories. But you will also need to document more specific payroll details elsewhere. We recommend having a separate spreadsheet or document where you outline payroll details for each employee. This will help you remember the next year what changes were made and better communicate any payroll changes to your bookkeeper. Payroll is one area we encourage churches to overcommunicate since there are so many details and variables.
Consider Google Sheets for Budget Collaboration - We have worked with several churches that have started using Google Sheets to build their budget so that their leadership team could more easily collaborate on the budgeting process. Google Sheets allows you to make comments, leave notes, and suggest edits without needing to pass around a spreadsheet file. We even created a walkthrough of how you can do this in our Church Finance Resource library.
Create Balance Sheet Funds (as needed) - At the end of each fiscal year, your net revenue will roll over into retained earnings or Unrestricted Net Assets in non-profit terms. Let's say you collected $75,000 in donations in 2025 for a future building project. If you want to make sure that the fund balance carries over into the new year, you would need to make sure you create a fund on your balance sheet. Balance sheet funds are not affected by the fiscal year end and only increase or decrease when income or expenses hit that fund. In this example, your accountant could move the $75,000 of building income from the P&L to the newly created Building Fund. From that point on, you could put all income and expenses into that Building Fund, and it would not affect your profit and loss statement. If you think this might be something helpful to your church, just reach out to your ChurchBiz CSR, and they can help you think through it.
Consider Cash Flow in Budgeting - Many of your budget categories are spread out primarily evenly throughout the year. For these, it’s fine to average the total amount over 12 months. However, if there are larger one-time expenses (such as a large youth camp payment, a conference, or a planned repair) that will be incurred all at once, you may want to detail that timing in your budget. Your finance team needs to ensure that the projected cash balances can cover these as well. Typically, that may only be a problem for significant expenses that hit early in the year. If your projected monthly giving doesn’t create enough surplus to cover the expense, you would need to make sure you're setting aside reserve funds from the prior year. Typically, this can be easily resolved, but it's something to keep in mind.
If your church needs help with the budget creation process, check out our budget template pack, which you can download here—LINK. We would also encourage you to check out our Finance Team 101 course, which goes in-depth into the budget process.