Show me your budget and I can tell you how you spend your time, where you focus your resources, and what you believe are the greatest priorities for your church and programs.

Think about your personal spending. If you showed me your latest bank statement or credit card bills, I would be able to tell you how you spend your time and where you focus your personal resources. All I would have to do is take your income and expenses for the statement period and assign categories to the ones we see repeated.

For example, I may see expenses for great restaurants (dining), a gym membership (fitness), doctor visits or medications (medical), and ticket purchases for shows and concerts (entertainment).

On the incoming side, I may see a check deposit from your job (salary). If you provided two or three months of data, I would have a good idea about how you prioritize resources.

Tip 6:  The budget is a reflection of your pastoral priorities

The same can be said of your church priorities. What are the categories of income and spending that the parish receives and spends? Most likely, the largest income category for the church includes offertory collections while staff salary and benefits drive the majority of expenses. These categories make sense as priorities. Without collection income, the church would have virtually no resources to operate besides savings or any endowments. Salary and benefits also make sense because of the need for the most critical resource for any organization—people to accomplish the work.

This makes analyzing the next categories of spending very important. After salary and benefits, what is the next highest level of spending? And next? And next? This is when budget analysis can really help determine a way forward (More on this topic later in the week).

There is no doubt that church leaders are busy people, so the next step in the process is to take the data that has been collected and focus your time. Focusing on the “right” areas of the budget means prioritizing your time so that you spend the greatest amount of effort in those areas that will provide the most significant benefits. A nice tool to deploy during this phase of the process is to calculate the Budget Category Impact Percentage (BCIP). Tomorrow, we will discuss how to calculate the BCIP!

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“Sorry, it’s not in the budget.” This is not a terrible response in and of itself, the problem is when the budget is used often as a penalty stick or prison.

To some people, the budget is used as a weapon of passive aggressive destruction.

“Well, the church budget committee doesn’t meet until 2023. Sorry, you are out of luck.”

As we have discussed, budgets are not created for constraint, but to offer freedom. A budget is a management tool that allows you the freedom to connect resources to mission priorities. 

The budget is also not to be used as a weapon —  it is a plan that offers leaders and organizations the insights they need to make informed financial decisions. Yes, the budget offers parameters on how much you expect to receive and to spend. But, the budget is also a GPS to help direct you to your destination. However, as we all know, directions are only as good as the person driving. The driver must be able to adjust for conditions on the ground – weather, road closures, accidents. The budget can offer this flexibility.

In fact, the budget empowers effective decision-making by providing directions for saying “yes” or “no” as circumstances arise. But, the budget should never be used as a simple way to say “no”  because someone has not taken the time to establish priorities and create a resource plan that is collaborative, transparent, and reflects the needs of the organization.

When the budget is used as an excuse, leaders risk losing the trust, credibility, and morale of those they lead.

Developed and executed well, the budget is never a negative excuse — it’s a positive reality.

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Read Parish Finance: Best Practices in Church Management

It’s not unusual in a typical church for each ministry or organization to want control of their finances. Each will insist they need their own checking account. They don’t.

If a church has too many checking accounts it makes it difficult, if not impossible, for the church’s leadership to maintain control of finances. This will impact, not only the ability of the parish to provide accurate financial information but will greatly increase the opportunity and the temptation for embezzlement.

As my co-author Dr. Chuck Zech notes in our Parish Finance book,

In a classic case, when the Diocese of San Diego declared bankruptcy in 2007 in conjunction with the clergy sexual abuse scandal, it was discovered that the average church had eight checking accounts. The presiding judge wondered aloud how any parish could effectively control its finances with that many individual checking accounts. The authors have tales of parishes with more than 50 checking accounts, each controlled by a separate parish organization. This is clearly untenable

In reality, some church organizations do need their own checking account. A parochial school, for example, needs its own account. A national fraternal organization, like the Knights of Columbus, could justify having its own checking account. But the choir, adult education committee, youth group, etc. will also argue that they need their own separate checking account.

Limit Church Bank Accounts – One Checking Account Can Work!

The vast majority of church organizations could easily get by simply having individual line items in the parish’s statement of accounts, one for revenue and one for expenses. That would allow the parish to control the organization’s finances while still providing the opportunity to monitor its budget. By creating a budget that is built by program area, there is no need for separate accounts because managers can easily access reporting information.

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It is important to design your budget recognizing the fact that some revenues and expenses fluctuate throughout the year. Most churches develop a twelve-month budget but differ on how the budget is displayed and managed.

To have the most realistic and manageable view of the budget, create a Church Cash Flow Budget. Unlike the creation of a budget that evenly divides income and expense categories by the number of months in the budget period (linear), a Church Cash Flow Budget provides realistic month-to-month projections of anticipated receipts and expenditures. The advantages to creating this type of budget are numerous, including:

• Gaining visibility into actual revenues and disbursements of cash
• Understanding how seasonality may affect revenues or expenses
• Managing cash flow for months with higher expenses or lower income.
• Mitigating the risk of not having enough cash on hand to pay bills.

Tip 3 is brought to you by the Church Finance 30/30 Series