“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.

Read More Church Finance 30/30

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.

Read More Church Finance 30/30 Tips

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

Ask any church leader about church management and one topic always comes up – infrastructure! From building maintenance, boilers, roofs, sidewalks, and parking lots – this is a top-of-mind issue when it comes to financial planning.

Here is the good news – the church capital assets budget is a proactive way to analyze the present and plan for the future. Defined as the spending plan for updating, repairing, maintaining, or purchasing capital assets, this budget can save you time and money today, tomorrow, and forever.

Capital assets are simply those items that the parish owns that have value extending beyond a year. For example, the church building and rectory are capital assets because the value of these assets continues over multiple years. Other examples might include the parking lot, computers or any major equipment owned.

By creating a church capital assets budget, church leaders can reduce their fear of dreaded leaks, breakdowns, cracks, and potholes!

Interestingly, even though these assets are critical to accomplishing the mission of the parish, many parishes do not have a capital budget. For example, if a church building is unusable due to maintenance issues or the high costs to operate the facility, how does the parish accomplish its critical mission?

A strategy to get started with effectively managing capital assets is to catalog all assets owned by the church and document the relative age of the assets. By recording this information, the parish can project when assets may decline or will need replacement.

The other benefit of this type of documentation is succession planning. When a new pastor arrives at the parish, the catalog can be extremely helpful to know what assets exist at the church.

By developing a capital assets budget, the parish is prioritizing the critical infrastructure that is necessary for meeting mission goals.

In tomorrow’s post, I’ll discuss how to go about cataloging church assets to get this plan created.

Read More – 30 Tips in 30 Days

My experience working with ministers is that for many, church budgeting is viewed as a necessary, yet stressful and time-consuming exercise. People resist or even fear the topic because of seemingly complicating processes or past negative experiences. Even with personal finances, many people grow up learning that developing a budget is good practice but a constraining activity designed to prevent or control people from doing all of the things they want to do.

In simple terms, the budget is the tool that connects church priorities to financial resources. The alignment between church mission, vision, pastoral priorities, and budgeting are integrally linked. Effective parish budgeting not only enables you to plan, allocate, and manage resources effectively, it will empower you with information and insights to help inform decision-making.

So, where do you begin? Let me help debunk the myth of budgeting as a constraining activity and provide some simple strategies for developing an effective, efficient, and collaborative budget and financial management practices. Let’s begin with understanding the three main phases of the church budget process.

Tip 11: Formulate, Execute, Control

Below is an excerpt from Parish Finance: Best Practices in Church Management (Mahwah: Paulist Press, 2016).

Phase 1: Church Budget Formulation

Budget formulation is the process used to develop the budget. This is where you will review the variety of income and expense categories and determine how much you expect to receive and project how much you plan to spend. There are a variety of methods we can use to create the budget and in which we can develop the budget. Whether you use top-down, bottom-up, incremental, or flexible budgeting, the framework will help you structure the development.

In the budget formulation phase, the parish will get into the nuts and bolts of budget building. Here a variety of questions will be answered including:

• What are the assumptions and expectations for the upcoming year?
• How will resources be allocated for staff, programs, emerging requirements, or assets?
• What information and methods will be used to ensure that accurate projections/forecasts are developed for income and expenses?

This is the phase of the budget process where we will build the “budget house.” We will review architecture plans, pour a solid foundation, frame the walls, and build a strong roof so that as storms rage, the house remains sturdy and strong.

Phase 2: Church Budget Execution

Once the income and expense parameters have been set, and the budget has been approved, the plan is ready to be implemented. Budget execution is the phase in the budget lifecycle when the checks are written, salaries paid, and income is received. Policies and procedures are established to ensure accountability. Clear roles and responsibilities are developed for who, what, when and how resources will be authorized, distributed, and accounted for. The outcomes of this phase are policies and procedures for collecting and distributing resources.

Phase 3: Church Budget Control

Complementing the execution phase, budget control is the part of the budgeting lifecycle that ensures that the efforts that you have put into the other steps of the process are successful. Strategies and techniques can be deployed to keep you on track and headed in the right direction with warnings along the way if you are getting off track. Actual income and spending amounts are compared to budgeted projections to measure variances between the amounts. With this information, parish managers can accurately account for resources or deploy mitigation tactics if spending is getting out of control or if resources need to be reallocated.

All three of these phases build upon one another and create a budget lifecycle that brings flexibility, adaptability, and accountability to financial planning and actions.

Qeustions/Comments? Contact me at mjcastrilli@gmail.com.