Having a budget in place is a useful feature for a church or non-profit organization. A budget is an important metric for evaluating the annual performance of church activities. A budget also empowers workers to act somewhat autonomously as long as they stay within budget limits.

Setting a budget for the first time can be challenging. At first, it may seem like there isn’t even enough money to bother with such a plan. Actually, managing small amounts of money can be very useful. Over time, as your budget structure grows, so does the freedom you gain from having a structured spending plan.

So where do you start to build a budget? If the church has any past spending history, that is often the best place to start. If there are several years of spending history, that’s even better. With a year of history, there may be spending anomalies, such as one-time purchases or emergencies that won’t repeat from year to year. With several years of history, expenses can be averaged and the likelihood of normal spending habits should be easy to establish.

Start with a month-to-month spending pattern. Evaluate recurring expenses. They are often the “fixed costs” of an organization. Salaries, utilities, regular maintenance, office supplies, and scheduled events often fall into these categories. Very often, these costs represent ninety percent of the organization’s expenses. The remaining part of the expense can be for one-time purchases, replacement of old equipment, taking advantage of new opportunities, and increases in salaries and maintenance. Obviously, there is not a lot of money available for these items. Therefore, a multi-year spending plan should be considered for new purchases and salary increases.

If a chart of accounts exists, each parent item in the list of accounts can be assigned a budget amount. If a list doesn’t exist, it’s usually a good idea to create a comprehensive list of expense accounts or categories and then assign a dollar amount to each item on the list.

Once the budgeted figures are available, a periodic review of actual vs. actual spending is carried out. the budgeted expenditure can be produced. It often happens that spending is sometimes done faster or slower than the time frame provided by the budget. In a review, it’s good to compare actual spending to a year-to-date budget. In this way, if the expense is lower than expected, money can be reserved to meet known budget amounts that will occur before the end of the year.

A budget is an important tool in running a church or organization efficiently. Helps keep control of expenses. Empowers workers to work autonomously. It also provides a metric of how efficiently the organization is running.