Building a budget has got to be the least attractive part of going into ministry.
I remember when I received the call from the Lord to go into ministry when I was in junior high school. I had dreams of sharing the gospel, comforting the down-trodden. I had a passion for seeing people who are far from God draw near to Him by faith.
Do you know what I didn’t think about one time? Budgeting.
But the reality is that churches require resources to keep the lights on and to do the work of ministry. To be fruitful, churches need to budget well in order to maximize the resources they have.
Unfortunately, I have found over the last three years of consulting full-time that most churches see budgets as a piece of paper they feel required to have. They see it as a spreadsheet prison that keeps them from over-spending. For most, it’s not a ministry document. It’s not life-giving. Put simply, the budgets are just bad.
It doesn’t have to be this way!
I’ve put together a list of four common mistakes that churches make when they build a budget that keep them from being effective. Read through these and see if any of them resonate with you.
Here are four warning signs of a bad church budget:
Warning Sign 1: Not connected to Vision
The most fatal mistake that churches make is that they budget around function rather than Vision. Churches that are in plateau or in decline tend to think operationally by default. They ask, ”How can we keep things going?” instead of asking, “Where are we going?” As a result, they budget to maintain the status quo rather than budget to fund Vision.
The first step to budgeting around Vision is to actually have as Aubrey Malphurs defines in Advanced Strategic Planning, a “clear, shared, exciting picture of God’s future for your church as it can be and must be.”
The problem is that churches rarely have a Vision that meets this definition. For example, it might be a clear Vision, but it isn’t shared among the congregation. Or perhaps the church’s Vision is generally shared, but it lacks clarity so that it can be acted on by the church. You cannot expect your church to budget around Vision if you don’t have one!
Warning Sign 2: Copied and Pasted from Last Year
Leading a church is hard work. Pastors are taught how to preach, but they are rarely taught how to lead and manage an organization. As a result, pastors often default to giving the budgeting process to volunteer teams or fall back on the “do what we did last year” syndrome. They’ll start with a copy of last year’s budget on the table, have a discussion about what was spent and what minor changes they want to make, and then they’ll call it a day.
When we asked a group of about a hundred pastors last year what their budgeting process was like, the vast majority responded that it was more or less a “copy and paste with minor changes” deal. This is fine if leaders aren’t aware that there is another way.
There is! It’s called Zero-Based Budgeting. This simply means that every year, the budget for the whole church doesn’t start with last year’s budget. It starts at Zero—zero planned dollars for every ministry. Then the church rebuilds the budget, from scratch, every year.
This sounds like a lot of work, and it can be. But it’s worth it. A Zero-Based Budgeting process will reduce ministry spending waste (which you may falsely assume you don’t have), and help to solve the first problem of not budgeting around the church’s Vision.
We are doing a free training on how to build a Zero-Based Budget on September 25 at 11am Eastern. You can click here to sign-up. It’s free. No sales pitch. Zero-Based Budgeting is our number one recommendation on how to fix a dysfunctional budget.
Warning Sign 3: Assumes Giving Growth
A common process in churches when setting an overall budget amount is to take what came in the year prior and assume a 2-5% (or more!) increase. Churches will say that they’re budgeting by faith. While it’s God-honoring to live and walk by faith, churches are often hamstrung because their overzealous assumptions can keep them in the red for much of the year. Instead, if churches set a budget number that is 5% less than the prior year’s offerings, they have intentionally created margin.
With this margin, churches can respond in faith to what the Spirit is leading them to do when there is an increase: save, invest in church planting, engage in strategic planning, plan a future campus, make capital improvements, etc. Healthy churches are not constrained to using budget increase to fund their necessities. They can use their margin to take on faith-based risks because their needs have been covered.
Healthy churches budget below their means.
Warning Sign 4: Very Little Detail
Whenever I see a church budget with very little detail, I get nervous. For example, when I see a Youth Ministry listed on a budget for $10,000, and that amount is not itemized, I wonder if the church (or even the youth pastor!) has a specific plan for how that budget will be spent. When I see very little detail in a budget, I doubt that a church truly knows how it’s spending its money. I doubt that the church can know if it’s getting a good spiritual return on its ministry spending. I doubt that the church can know where wasteful spending might exist. I’m not suggesting that churches or church leaders are doing anything illegal or immoral with the money. I’m suggesting that they simply cannot account for how fruitful their spending has been.
However, having a detailed budget will create accountability. By having itemized budgets for core ministries, we ensure that money is being spent on ministry-related expenses. But ultimately, this is a stewardship issue. A fully itemized budget allows us to see how fruitful each ministry budget was.
In 2 Peter 1, the Apostle Peter exhorts believers to “make every effort” so that we will be kept “from being ineffective or unfruitful.” While Peter was speaking in the context of growing our character, I believe that the same principle applies to being diligent stewards and leaders of Christ’s Church. He has made us under-shepherds, and we ought to take our duty very seriously.
Setting the budget may seem like just one more task in a year’s worth of management tasks. The truth is that getting the budget right can launch your church into more focus, more unity, and more margin for fruitful ministry.
If you would like to get the most out of your budgeting process, please join us on September 25 at 11am for our Building a Better Budget webinar, where we will give you practical training on implementing healthy financial systems and Zero-Based Budgeting principles.
INTERESTED IN BUILDING A BETTER BUDGET?
Join us for our upcoming webinar! It’s completely free.
SEPTEMBER 25, 2018 AT 11AM EASTERN
In this webinar, you will learn:
- The fatal flaw in most church budgeting processes
- How to reduce “waste” in ministry spending you didn’t even know you had
- How to maximize your budget to gain disciple-making momentum
- Fundamentals of “Zero-Based” budgeting techniques
This webinar is free. There’s no sales pitch. The sole intention is to help you become a better leader and help your church get healthier! Space is limited.