Church Budgeting 101: Income Categories

When I work to set a budget for a church I have a particular philosophical approach. There are really three basic approaches, one I prefer, another I decline, and the third I've practiced. Good Shepherd utilizes the third, though I hope we are moving toward the first.

The first approach asks the question, "What sources of income do we anticipate." Then based upon income projections spending is projected by looking first at historical data to project trends, then seeking to understand current and new ministries God is leading us to. The historical data is most helpful with things like utilities, mortgage, and other building related issues as well as Payroll.

The second approach is to begin with the past year's expenses. Then to add and subtract expenses based upon informed projections. Finally, income is budgeted based upon what needs to be funded. Using this method, income and expenses rarely meet. Sometimes income isn't projected at all.

The third, then, is any combination of the two above.

At Good Shepherd we begin with a pledge campaign. In my philosophy this is an important place to start. A churches income is simply the conglomeration of the faithful giving of it's members. My assumption is that members pray about their finances and what their depth of giving with be to the church each year. That being the case, then the faithful offerings made by the members is the theologically correct place to begin. There are a few other areas of income that can be projected as well. Giving toward debt retirement, unidesignated income given in the offering place (cash with no name attached), income from sales and fees, PDO and Pre-School income, and other income (historically Good Shepherd has income that doesn't neatly fit in any designated category, so "other" is the place for it.)

At the same time that we are putting together our projected income we are putting together projected expenses. This is mostly figured based upon historical data and budget requests from the several ministries. In the end, we may end up with a bottom line that is positive, negative or even (negative tends to be the more common result) but we don't insist on "even."

My hope for our future is that we will get to the point of projecting income first. Following that we will assemble a priority list of projected expenses. Then beginning with income we will substract the highest priority expenses first and then go down the list until we hit zero. At this point all expenses that fall below this line are assumed to be placed on a list to be spent as income allows or to not be spent at all. This leaves open the possibility that someone's pet project will not get funded. However, if the mission of the church is held up as the deciding factor, the decisions on funding should be widely accepted.

Next Post "Expense Categories".

Church Budgeting 101: Intro

As our church prepares to launch into a campaign to reduce our mortgage indebtedness I've been told by several people that it would be good to share some of the philosophy that goes into budgeting and managing money in the church. Over the next several weeks I'm going to share my thoughts on the subject. Hopefully this will be both a source of education and the beginning of a conversation. To read all the posts on this subject simply click on the label "Church Budgeting 101" at the bottom of this post.