Which budget method(s) do you use when you create your church budget? How do you estimate revenues and expenses?
There are a variety of methods you can use to create an effective church budget. Three common techniques:
- Top-down budgeting
- Bottom-up budgeting
- Incremental budgeting
Let’s begin with top-down budgeting.
Top-Down Budgeting
I know it may be intuitive, but a top-down approach to budgeting is when resources are allocated at a high-level and the details are then worked out based on this amount of funding. To use a simple example, think about your salary. Each month, your employer gives you a salary but does not dictate how you spend that money. Unless a pay raise is on the horizon, you know how much money you have available to spend and you work out your budget based on that amount of money.
The same method can be applied to organizations. At certain organizations, a leader will establish how much money will be allocated for a given project and then the budget is created from that level of funding. On the other hand, maybe you receive a donation from a benefactor and you are going to budget those resources using this method.
Like all budget methods, there are inherent advantages and disadvantages.
The advantage of top-down budgeting is that the method is relatively simple. It does not necessarily require labor-intensive cost estimating because the overall amount of money that will be budgeted is established. Using this method, money is then allocated to categories of spending. One disadvantage to top-down budgeting is that you might be forcing or form-fitting various cost elements to meet your target.
Empowerment and Buy-In Go Together
Top-down budgeting can work really well when you know the amount of money you are willing to allocate or you have a set amount of funding being given by an external source. The key is to involve and empower others who will help you manage the budget so buy-in is established early in this process. As a general rule, if the top-down method is applied to budget formulation, it is important for those who are given responsibility for managing the budget to propose and justify enhancements or reductions for the budget they have been allocated.
A simple method would involve asking the Director to detail how she plans to spend the money AND allow her an opportunity to propose changes to the amount that has been allocated. You may now be saying, “Ok, but staff will always seek more resources, right?” Again, this is where collaboration is so critical in budget matters. When staff members are empowered and know that they have input into a budget’s creation, it is much less likely that unreasonable requests are proposed. Budgets that are developed secretly or through closed-door methods serve no one well and actually diminish staff morale. Top-down budgeting works well when those who will manage the budget are involved in the process.
Learn more about the benefits of church budgeting!
Photo Credit: David Holt London Flickr via Compfight cc
