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Prepared for Church Budgeting: 7 Blunders to Avoid

Church Finance Basics

Welcome to the third and final part in our church preparedness series. In the first two posts, we discussed how to build church emergency savings and risk management steps every church should be taking.

Today we’ll identify common church budgeting mistakes with a suggested solution for each. As you begin planning your 2015 budget, be sure to steer clear of these classic blunders.

Blunder #1: No accountability for leaders .

The Fix: All department/ministry leaders must be responsible for their budget preparation and be held accountable throughout the year for budget adherence.

Regularly meet with key personnel to evaluate actual spending against the budget. This will help identify overspending and ensure ministry funding needs are met throughout the year.

Blunder #2: Taking last year's budget and just increasing it.

The Fix: Start your budget at zero every year.

Every budgeted expenditure must be evaluated and justified each year. Needs and visions change, and so must the budget. In addition, review prior years’ actual expenditures to accurately account for seasonal giving trends and other expected needs.

Blunder #3: Failing to budget for cash flow variations.

The Fix: Consider revenue and expenses on a monthly basis so your budget reflects expected fluctuations in cash flow.

For example, most churches experience lower giving and high utility expenses during the summer. It’s crucial to budget revenue conservatively when possible. Try to coordinate larger expenses with higher giving months. Otherwise, budget to have operational reserves in high cash flow months to cover months when giving is lower. Past monthly financial statements can help you accurately project these variations.


Blunder #4: Straying too far from recommended percentages.

The Fix: Adhere to the recommended church budget allocations shown in the chart at right.

Blunder #5: Saving nothing.

The Fix: Allocate a portion of undesignated income each month toward building an emergency fund—enough to cover three to six months of expenses.

You may need to cut expenses. The goal is to have more money coming in than going out. Use this positive cash flow to save for rainy days and fund new ministry initiatives.

Blunder #6: No structure/template.

The Fix: Download the church budget template below.

Especially for new churches and those without accounting software, an easy-to-use template designed for church accounting makes budget planning much easier.

Blunder #7: Failing to consider all cash needs, including capital expenditures, not just operating expenses.

The Fix: While not an exhaustive list, consider the following:

  • Debt service and other balance sheet items
  • Capital projects and expenditures
  • Salary increases
  • New hires
  • New ministry programs
  • Insurance premiums
  • Equipment repairs and replacement

Be sure to allow for contingencies in case of budget overruns in any one area. When it comes to budget planning, it’s better to err on the side of being too conservative rather than too optimistic.

Done right, adherence to a well-prepared budget is the foundation for godly stewardship of church finances. Your budget will also give you the information necessary to make wise strategic financial decisions for your ministry. Then as the ministry grows and it becomes necessary to seek financing for expansion or church investment advice, you’ll be well prepared for that next step. Happy budget planning!

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