Having a set budget 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 the limits of the budget.

Setting a budget for the first time can be challenging. At first, it may seem that there is not 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 that comes from having a structured spending plan.

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

Start with a spending pattern from month to month. 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 portion of spending may be on 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 on new purchases and salary increases should be considered.

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

Once the budgeted figures are available, a periodic review of actual spending vs. the budgeted expense can be produced. It often happens that spending is sometimes carried out faster or slower than the term provided by the budget. In a review, it’s good to compare actual spending with a year-to-date budget. This way, if spending is less than anticipated, money can be set aside to meet known budget amounts that will occur before the end of the year.

A budget is an important tool for 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.