Navigating the Church Budget

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Just as a pilot needs a flight plan to estimate departure, arrival, and time to complete the flight, churches need a budget to efficiently achieve its mission while demonstrating good stewardship of their funds. A realistic plan combines the goals of your church with known financial data and estimated expenses. Each line item in the budget should be compared to actual performance, allowing leadership to monitor financial resources to ensure that ministry needs are met throughout the year.

Budgeting Practices

Several methods can be used to plan a church budget. An all too common tactic is to base your budget on numbers from the previous year and then arbitrarily increase or decrease all line items by a common percentage. This can be useful for certain expenses; however, a zero-based budget is a much more accurate and recommended, best-practices approach.

When designing a zero-based budget, each line item is evaluated independently based on need and the overall vision of your church. Although this approach can be more time consuming, it allows leadership to assess how and when funds should be used, eliminate unnecessary spending, and effectively allocate resources. Consider individual revenue and expense line items on a monthly basis so the information can reflect known fluctuations in cash flow. As you determine these items, think through predictable seasonal variations in both income and expenses (e.g. lower attendance and higher utilities in the summer months). Considering these factors will help increase the accuracy of your budget projections.

Once the budget is established, monitor spending on a monthly basis. Consistent and timely monitoring of the budget, and comparing it to actual results, will allow for any necessary reallocation of funds and reduce the likelihood of overspending.

Key Revenue

Monthly budgeted revenue should include unrestricted contributions (tithes and offerings) and other revenue streams including, but not limited to, rental income and tuition. Past monthly giving trends provide guidance for budgeting unrestricted contributions. Although the church may be in a period of growth, monthly revenue should be budgeted conservatively to reduce the likelihood of a cash shortfall.

Key Expenses

There are several key expenses that should be identified and accurately measured early in the budgeting process including personnel costs, occupancy costs, and office expenses.

Personnel costs are the easiest to measure, as staffing needs and compensation should be well established before the fiscal year begins. One way to reduce spending in this area while maximizing opportunities for ministry is to train volunteers to perform duties. As a benchmark, a financially healthy church should dedicate no more than 45% of undesignated tithes and offering to personnel costs.

Occupancy costs include mortgage debt service (principal and interest), lease expense, utilities, telephone, insurance, repairs, maintenance, etc. These monthly payments should be known upfront; however, the budget process is a great time to incorporate or reevaluate a debt retirement strategy. Occupancy costs should not exceed 25–30% of tithes and offerings.

Finally, when evaluating office expenses such as advertising, printing, postage and small equipment, aim for 10% or less of tithes and offerings.

Cash Flow

When preparing your budget, consideration of cash flow is critical. Cash flow is simply the money coming in and going out. A carefully managed budget should result in positive cash flow. Estimating cash flow on a monthly basis will help ensure that your church has the funds needed to continue ministry. Conversely, a cash shortage puts a burden on churches to either quickly borrow additional funds or overdraw cash accounts.

When determining cash flow, look at both seasonal attendance and historical data. Most churches experience attendance fluctuations throughout the year that directly affect giving patterns and, therefore, cash flow. This is especially true during the summer months. Expenses such as utilities can also vary by season. Do your best to look at both internal and external variations as you project cash flow.

In addition to covering expenses, properly projecting cash flow helps determine the best timing for capital expenditures, growth, and expansion. Being prepared for large expenditures will reduce financing needs. If it is prudent to seek financing, financial statements reflecting historically positive cash flow and cash reserves for an adequate down payment will allow for reduced interest rates and more favorable terms.

As the cash flow is projected within the budget, allow cash reserves to accumulate for times of emergency such as a disaster or an unexpected decline in giving. Building cash reserves of 60–90 days of operating costs helps prevent disruptions in ministry.


Clearly identify your church goals and be realistic about how to accomplish them. A good plan relies on information from both internal and external sources, and those sources need to be informed to provide valuable input. Throughout the budgeting process, consider the input of your leadership and be aware of outside issues that could have an impact on giving.

A pilot relies on the accuracy of the flight plan and passengers trust that they will safely reach their destination. Similarly, congregations and communities trust churches to set a high standard of good financial stewardship. Prudently managing church operations will help maximize healthy ministry and outreach, thereby increasing the opportunity to share Christ.

If you have questions or need direction as you plan your church finances, don’t hesitate to call us at 888.599.6015.

Free Church Budget Template. Use this as a foundation to create the financial plan for your church. Download Now »

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