Say the word budget and you may see eyes glaze over, people shrink down in their chair or attention shift to cell phones. The term “budgeting” is often burdened with negative connotations of being restricting, time consuming, useless, and confusing.
Budgeting is not a mysterious process done by an accountant in a windowless office, nor is it a futile exercise, but instead it has the ability to influence organizational communication and the power to further missional impact.
Getting everyone on board
The first step to creating a meaningful annual budget is ensuring everyone is on board and has a clear understanding of the budget’s value. A culture that approaches the budget wholeheartedly versus with begrudging compliance will naturally develop a budget with greater impact. There must be collaboration across the organization, during both the planning process and throughout implementation. As a church, you listen to the diverse voices of your congregation, knowing that the needs and perspectives differ throughout the body. The same can be said for the budgetary needs of the church staff, which is why organization-wide discussions are critical when preparing a budget. Balancing these needs and perspectives can be daunting, but it helps when you keep the mission in mind. When choosing between alternative items competing for funding, take a moment to reflect and ask yourself “will this item further our missional impact?” Intentionally keeping the end goal in mind minimizes incongruities.
Monitoring your budget
The budget is a critical communication tool for achieving the mission, yet it is not an autonomous regulating system. The second part of having a meaningful budget is monitoring. The budget requires continual monitoring to be an effective tool for achieving planned goals. Budget reports that segregate the items which are directly controllable by a staff member from expenses beyond their control facilitate accountability. Effective monitoring reports, such as budget to actual reports, also enable adaptation to changing circumstances and provide a layer of internal control.
Finally, what do you do if you have created a meaningful budget and something significant changes? For example, as a result of the recently passed changes to the tax code some churches saw a dramatic increase in giving in December 2017 as church members prepaid their 2018 donations. In a situation such as this, because donations received are not in the same fiscal year as the budget, budget to actual comparisons are skewed. One alternative is to supplement budget reporting with an additional line item for the carryover giving. Another alternative is to include a budget reconciliation that starts with the current year change in net assets and adjusts for revenue received or expenses incurred outside of the current budget period.