Operating without an annual budget
In fairness, there are very few churches that do not have some form of budget. The key words in this caption are “operating without”. The main point here is that even though most churches do have some type of budget written on paper, far too many operate as if they did not have one or misuse the one they do have.
Historically, church budgets have had a two-fold purpose.
First, they fill a financial role helping to make sure the church stays within acceptable and approved spending parameters.
KEY: The pendulum swings pretty wide in regard to church mismanagement of budgets. Some churches completely ignore the budget once it is approved begging the question, “Why have one to begin with?”
Other churches let their budget become a straight jacket, leading to some unfortunate results:
“Stingy” finance committee/team members may refuse to allow their church to begin new ministries because “This is not in the budget!” I have seen situations where churches have missed out on great ministry opportunities because they “postponed” them until the end of the year when the new venture could “be budgeted”. This in spite of the fact that the church had ample cash in reserve to fund the new project.
Occasionally a church staff may be intimidated by finance team members and are fearful of overspending a budget line item. But, due to their belief that a project is essential, go ahead and authorize expenditures. To cover their tracks, the expenditures are not included in the budget but are classified to other less visible areas, such as designated funds or the church’s net asset account (retained earnings). The budget report is unaffected making it appear that the church “made budget”. Too much of this type of activity results in meaningless financial statements.
The church budget also has a spiritual role in that a church budget is simply the congregation’s vision for the coming year, stated in dollars.
KEY: This is particularly important in the establishment of your chart of accounts. A church’s chart of accounts should reflect its ministry. What your church management software representative suggests is just that; a suggestion. The same goes for your CPA