Earlier this year, The Wall Street Journal reported on the increasing number of churches that are having difficulty making ends meet and are losing church buildings to foreclosure. While the number of foreclosures on churches (100 in the last two years, a large increase from just 8 in the years before that) does not represent a significant portion of all churches in America, we can conclude that a much greater percentage of churches are struggling as a result of our latest recession.
What are ways to improve a church’s financial health? You might say that the answer is simply to increase giving and/or cut expenses. But increased giving or drastic spending cuts won’t always ensure financial health. Using sound budgeting practices focused on making better plans with the funds you have is a crucial part of any church’s financial strategy. Here are three steps to improving the financial health of the church through budgeting.
1. Historically-based budget
Budget based on 90% of last year’s actual offerings, not ‘pledges.’ (The actual percentage can vary depending on how much yearly offerings fluctuate, but 90% should be the maximum.) Pledges are promises by church members to give a specific dollar amount and while they may end up being fully realized at the end of the year, they often may not be. A look at actual historical giving, and creating a budget on slightly less money, is a more reliable method. Anything extra can go towards savings, increased mission outreach, "wishlist" items the church may want to purchase, etc.
2. Anticipate large expenses
Copy machines, computers, parsonage appliances, roofs... These are all items that will eventually wear out, break, and need to be replaced. Rather than be ‘surprised’ when they do (and it should never come as a surprise!) the church budget should have allocations to sinking funds that are used to save for repairing or replacing these items.
3. Fund your mission
Aligning your spending with your mission will make it easier to determine what is important to fund and what is not as important when spending cuts need to occur. If your church has decided to focus on serving the poor or sending missionaries overseas, then these ministries should be prioritized for funding. If there are other programs or ministries that aren’t really a part of the core focus of the church, then you have a more compelling reason for lowering or removing funding if needed.
The finance committee of the church I attend (I am on the committee) is spending the next few months discerning how to best fund its mission (#3) as well as identifying the large expenses it will encounter in the near and mid-term future. The discussion is guaranteed to be interesting as different viewpoints will be brought forth, but I am confident the end result will be an improved budget.