Monthly Archives: June 2012

Funding the Vision

budget

budget (Photo credit: 401K 2012)

Many churches start their new budgets in September.  So with that in mind, I am writing this blog post with a few thoughts on creating a budget.  I’ve been working with budgets for years; personally, in business settings and in ministry settings.  One thing I have learned is that you do not set a budget based on what you need, but on what you have available.  A budget says “If” we bring in this amount of money, this is how we are going to spend it.  They are actually designed to focus on making effective use of income rather than searching for money for expenses.  With that said, you should always start with a clear understanding of your income for the set time period.  When you are calculating this, you should never use percentages of increase to project your budget.  Always use real numbers.  If the past two quarters showed an increase of $2,000 each, trends would tell us that there is a good chance that the next quarter will show and increase of around the same amount if all other factors stay the same.

Projecting Your Income:

  • Numerical Projection:  Determine what your history has been.  You can look over a given history to help you in looking forward.  If possible, use at least two to three years of history to get a clear picture of giving.  Use this picture to identify trend of giving based on your history.  If in looking at the previous two to three years, you see that each year you had an increase of $50,000 annually, then you can project that conservatively you will see $50,000 in additional giving in the coming year.  You don’t go up on your projected giving until you have a track record that shows your giving can increase.  Use real numbers.
  • Per Capita Projection:  What is your per capita giving?  Take your average attendance and take your average weekly income for the year and divide it.  You will come up with the per capita income per person per week.  (The longer the length of time is for your averages, the more accurate your per capita giving will be.)  You then can use your average attendance and your projected attendance to make an calculated per capita projection.

Calculate both the numerical projection and the per capita projection and compare these together.  If there is a huge difference between these, you may need to look at what some variables may be that would be causing a huge difference.  Have there been some huge one time gifts?  If so, you may need to pull these out because they are skewing your results.  I’ve found that, generally, using both of these calculation methods put me very close to the same projections.  Once you determine an annual projection using real numbers, you can begin to move forward.  It is a good idea to be conservative on your projections.  You can always do more with increased giving, it’s harder to cut back from initial projections when the giving falls short.  Conservative budgets also will give your staff freedom to spend their budget as it is needed.

Creating Your Budget:

Once you have a good understanding of your estimated income you can then create A, B and C budgets.  The A budget is if God really blesses and everything goes right (could be anywhere from 10 to 20% above budget).  The C budget is if things get tight and things go wrong (maybe 10 to 20% below budget).  The B budget is the primary operating budget and this allows shifting up or down.  You need to plan all three budgets in advance.  It’s easier to make alternate plans in advance than when you’re in the middle of the storm.  As you create these, have a simple one page broad budget by major categories.  Don’t get too detailed, just list general categories (i.e  Children’s Ministry, Student Ministry, Evangelism etc…)  Have 2 or 3 line items in your budget that are open and flexible, these could be designated as “Special Projects & Events”, “Ministry Expansion”, etc…  This gives you opportunity to also meet needs as they arise through the year using these categories.  When you are assigning dollar amounts to budgeted areas, don’t make it so tight that ministries can’t function.  Allow room for flexibility.

Filling in the Details:

Look at the overall pie and determine the percentage of the pie that goes toward Staff.  Keep in mind that churches are largely volunteer in structure, so we need staff to lead them.  Only use percentages for allocations.  Payroll should be no more than 50 to 55% of budget.  If your payroll is below 30% you are probably understaffed or not paying your staff enough.  Building needs should be 20% of budget.  Missions should be at least 10% of budget (this is all missions including international, national, state and local). Areas of Ministry should be 10% of budget.  This leaves 5 to 10% for other areas.

You need to know your seasons so you can manage cash flow.  When is your biggest quarter? When is your weakest quarter?  Are there times in the year that the cash flow expenses may naturally increase, but at the same time the cash flow income slows down?  Generally first quarter is going to be one of the strongest quarters.  At the same time, the end of second quarter and third quarter can also be a struggle.  Have a plan of action in place for if you consistently miss budget.  When will you move to “C” Budget?

If possible, allow your ministries to have the same budget as previous year plus half of the planned overall percentage of increase.  (i.e. if after you determine your dollar amount projection, you determine it will be a 8% increase, allow each ministry to increase their budget by 4%.)  Then look at what was spent in each ministry.  Identify growing ministries that may need slightly more of an increase to cover needs.  Prior to having the staff develop their budgets, give them the specific dollar amount they will have to spend for the year.  Don’t give percentages or expect them to calculate their overall budget.  Once they have their overall budget, have the staff submit 3 budget requests.  The first request is their General Budget Request (this will match the number they have been given).  The second request is a One Time Request.  This is when a ministry has an expense that is not a reoccurring expense.   The third request is a Ministry Expansion Request.  This is to expand their current ministry into a new area that will be an ongoing part of the ministry from that point forward.

Reserves:

Don’t think you have to spend surplus just because you have it.  At the same time, you shouldn’t hoard what God has given to the church just because you’re not sure about what will happen in six months.  We serve a big God who is capable of providing our every need.  You can set aside a Cash Forward Reserve (2 to 4 weeks of operating budget) in a separate account so that if things slow down, you have a few weeks to make budget adjustments.  Anything past this amount would be considered idle money.  One of the principles from the parable of the talents is that God hates idle money.  It should be put into play for the Kingdom.  Not doing so will limit God’s blessings on your church.  Our faith is in God, not in our money.

Note: You should never promote that you are behind on budget.  People do not want to give to a sinking ship or a need, they want to give to a compelling vision. So promote a compelling vision.  What is God doing? Where is He leading? What needs can be met? Make it a habit to talk vision at every opportunity.  It is also good to identify your annual turnover rate of individuals/families in your church.  This number is good to know as it will help you not only understand the importance in developing a culture of giving in your church, but also realize that every year there is a portion of your income that is always changing.


A plan for getting there!

I recently had the opportunity to fly to a couple of different areas of the country.  On both instances, I noticed that, although, the airplane was the source of travel, there were a lot of things in place to make sure that both the passengers and the plane were able to make it to where it was supposed to go.  For the passengers, there is a solid system in place of what happens with luggage, what happens with passengers, what happens at security check-points and even what happens when boarding the plane.  For the airplane itself,  there are teams of people directing and guiding the plane to where it should be.  Additionally, the airplane is pointless without a runway for takeoff.  Someone had to think of how all of this would work in order to accomplish the overall purpose of actually riding an airplane from where you are to where you want to go.  A system is simply a plan or structure for doing something that will consistently get you from where you are to where you want to be.

In ministry, our main goal is helping people become who it is God has made them to be by reaching them where they are and helping them to get where God wants them to go.  That is our goal.  But how do we get there? Is there a process, a system, strategy, or a structure in place that will serve as the runway?  The truth is, many times we want the big goal, but fail to put a system in place to accomplish it.  I’ve noticed that having a system or structure is, in fact, a Biblical principle.  If you examine Scripture, you start to discover that God is a God of order and plans.  He has overall goals that He wants to accomplish, but He usually uses a system to accomplish it.  Explore the first chapter of Genesis, the book of Nehemiah, Jesus sending out the disciples, the plan laid out in The Great Commission, Acts 1:8, God’s redemptive plan of Salvation.  In all of these, you can see some sort of structure that was used to move toward the desired goal.

I’ve also noticed that not only is structure a Biblical principle, it is also necessary for us to be able to efficiently accomplish the overall goal.  Below are a few things that help us better understand how it is necessary:

A system is necessary to:

  • Focus our Efforts.  We need to work smarter, not harder.  In order to do this, we must have a plan to include others in the ministry.
  • Minister in our Context.  There are needs that exist around us that can’t be met if we don’t PLAN to meet them.
  • Work with a Team.  If we’re going to all work together in the same direction with the same goals, it must be structured.
  • Communicate Clearly.  We should be able to communicate our vision and our plans simply enough that even a fifth grader can understand them.
  • Stretch our Faith.  As we develop our ministries, we will dream bigger than before, reach further than before and trust God even more in the process.
  • Get us There.  We need to have a system or systems in place with an overall goal that we can see is specific, measurable, attainable, relevant, and time sensitive.  The system doesn’t just help us get there, but it helps us know when we accomplish the objectives of our ministry as well.
The system created must always connect back with the overall vision of the church.  This will ensure that all of the ministries of the church exist to accomplish the overall vision of the church in the community and beyond.  It must also work in unison with all other ministries of the church.  We shouldn’t create anything that competes with or conflicts with the goal of another ministry of our church.  As we develop our system for a specific ministry, it will give us a framework for allotting our time as well as our resources.  Additionally, it allows us to know if we’re moving in the right direction towards our goals or away from them.
As you develop your structure and begin to move forward, it should provide vision for change and focus for the ministry.  It should also give your team, not just a plan, but also a sense of purpose and make it easier to bring others into the ministry.  As I have been developing ministries, I have discovered that failing to provide a clear plan and structure will continue to  cause confusion and frustration for all who are involved.  I would encourage you to start  developing some simple systems that will help you get to where God wants you to go.
The reason I started this blog, www.insideministry.me, is to provide system and structure ideas for various ministries and other random thoughts as I discover new truths in ministry.  If you have any questions or would like help in moving forward with systems, I would be glad to help.  I have just recently started coaching individuals through personal, professional, and ministry related decisions and would be glad to tell you more about it if you’re interested in coaching.  You can go here to find out more.

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