Church budgeting

Holy Trinity is small church in an urban priority area, so we have a small church budget. Financial priorities and regular monitoring are crucial. I wrote the following briefing paper for our PCC and thought it might be of help to others. The principles apply to all churches, regardless of size.

A guide to budgeting

What is the aim of budgeting? We can put the aim positively or negatively:
1. We want the money we spend this year to equal the money we receive.
2. We don’t want to spend money we don’t have.

Or, in other words: We aim to have no deficit at the end of the year.

How can we achieve that aim? We need to ask three simple questions:
1. How much money do we expect to receive this year?
2. What are our priorities for stewarding that money? (giving as well as spending)
3. What will we agree to use this money for in this coming year?
4. Are there new initiatives we seek to start and are they affordable?

The questions are simple but the process is more involved and may involve making difficult decisions. There will be items of expenditure which are worthwhile but which we simply cannot afford. To find out what these items are, we need to ask the following questions:
1. What did we spend our money on last year?
2. What have been the trends for the past 3 or 4 years.
3. How much will these things cost this year?
4. Is there any money we don’t need to spend?

It is possible that, even after cutting costs as far as possible, the expected spending will exceed expected income. If that is the case, then we need to ask some more questions related to raising extra funds.

1.Can we ask the congregation to increase their giving at this time?
2.Are there external sources to which we could appeal?

Once we have set the budget we need to try and stick to it. To do this, we need to do two things:

1. We need regular updates showing actual income and expenditure compared to the budget.
2. We need to base our decisions for fund-raising and spending on what we agreed at the start of the year.
3. If unforeseen items of expenditure arise, we must review the budget to find if savings can be made elsewhere before committing to spending the new money.

With priorities and budget amounts established at the start of the year, PCC are simplified “yes it’s in the budget” and “no we didn’t budget for that”. If some extra funding is required we can say “it’s not in the budget but it is important”. We can then do one of three things to raise the extra money required:
1. spend our savings
2. appeal specifically to the congregation
3. apply for external funds

By budgeting in this way, we will keep on top of our finances. Budgeting also assures people that the church is stewarding their resources well and so encourages generous giving.