As an Executive Pastor, one of the things I could never avoid was doing the budget for the church each year. The budget was due to the eldership in early December, and it took a bunch of work to get it together. I typically started working on it in mid to late September.
I wanted to share the process I went through each year and a few pointers. I’ll assume your church uses QuickBooks or some other application that affords you some capability along these lines.
The basic approach is to use “actuals” from the current year to build a budget for the coming year. The amount of “tweaking” required to finalize the new budget depends on how similar the coming year will be to the current year. An aggressive growth strategy, for example, will require lots of adjustments in terms of outreach (marketing, advertising, events, etc.) and staff (salaries, benefits, recruiting expenses, etc.). Make sense?
Clean Up
The first order of business is to perform a detailed review of the current year’s “actuals.” If your situation is like mine, you have some misclassifications and other errors in your system. If these errors aren’t corrected before the new budget is created (using current year actuals) they will be projected forward to the coming year. Have your bookkeeper go through an account by account review of the actual expenses for the current year. I have found it easier to do this if you start with a high-level look at the church’s actuals versus budget report. Look for line items where there are significant differences between actual expenses and the amount budgeted. A quick review of the details often reveals misclassifications and other errors.
Create the New Budget
Using QuickBooks (or whatever application you’re running) use the “wizard” to create the coming year’s budget using actual amounts from the current year. Depending on the time of year you’re doing this (October, November, or December) your new budget will probably not be complete. You will take care of this in the next step.
“Tweak” It
Beginning with income accounts, go through the new budget line by line. Again, unless the coming year is significantly different than the current year, this is pretty much an exercise in the elimination of any errors or misclassifications and rounding. Rounding the numbers helps you to remember where you’ve been and where you haven’t. If you generate your budget at the end of November, for example, you will also need to fill in the December amounts by account by department.
Finishing Touches
At this point, you’re done for the most part. Simple! From here, I use a few different models to make adjustments. There’s a Salary Model which helps me to calculate the salary and payroll tax lines. Pay increases, headcount losses/additions, etc. are all put into the model which provides the monthly numbers I need for the budget.
I also have an Income Model I use to help project tithes and offerings for the coming year. I explain the model in detail in this POST.