The economy is still changing. Are you budgeting carefully?

by David Van Winkle, ECCU Vice President of Ministry Development
(Originally published as a post within ECCU’s former e-publication, The Buzz.)

If your fiscal year ends December 31, you’re deep into the 2010 budget process. How’s it going? Have the revenue and expense figures from the past 18 months provided much help as you plan for the next 12?

The economy may be hinting at recovery, but many ministries are skeptical, approaching the new year with caution. Some 40 percent of those who responded to a recent ECCU Ministry Advisory Panel survey said they plan on budgeting more conservatively while minimizing expenses. Another 33 percent will be monitoring their budgets more closely than they did a year ago.

Ready or not, the New Year will arrive in just a few weeks. And when it does, you’ll need to have an approved budget in place. So how do you budget in a changing economy? Carefully.

As ECCU’s ministry development officers consult with ministries, they’re talking a lot about budgeting. They’re also suggesting that budgeters develop a checklist that identifies essentials and accounts for unexpected changes. Here are some considerations that have emerged from those conversations:

KEY ASSUMPTIONS:

  • List the assumptions that your budget is based on.
  • Include what you know to be indicators of success, such as:

Giving per giving unit (individual commitment)
Number of givers contributing weekly (broad commitment)
Attendance (identify trends)
Number of volunteers, ministry leaders (ownership)
Ratio of volunteer opportunities to volunteers (burnout indicator)
Quarterly comparison to previous years’ successes (relative performance)
Health of local and national economy (external factors)
Amount you have given away (stewardship)

REVENUE:

  • Budget for income first.
  • Strive to achieve adequate liquidity.
  • Explore all potential funding sources.
  • Make it convenient for your donors to give.

EXPENSES:

  • Utilize zero-based budgeting. This will help identify expenses that are mission-critical and those that aren’t.
  • Include reserves when planning expenses.
  • Remember that personnel costs are typically your largest expense. Be creative when trying to control them. For example: Explore part-time or flexible work arrangements; compare your staffing plan with similar ministries; consider sharing costs with other ministries; use more volunteers.
  • People matter, so work hard to keep your staff informed, equipped, and motivated to fulfill their responsibilities efficiently and with excellence.
  • Hold off on discretionary spending until revenue comes in above budget for a full month.

ACCOUNTABILITY:

  • Establish a cadence of regular accountability for each budget manager.
  • Create and distribute financial reports to budget overseers that include comparisons of year-to-date budgeted, actual, and prior-year figures.
  • Conduct regular cash flow forecasts to determine if you need to make mid-year adjustments to expenses.
  • Perform monthly reviews with budget managers.
  • Conduct quarterly reviews of key assumptions with all budget managers.
  • Plan to regularly communicate your financial position to ministry supporters.

For more information about planning and managing your budget, check out the white paper You’re a Church Treasurer or contact our ministry development team.

Budgeting is difficult enough in a normal year. After one like 2009, the challenges are especially significant. All the more reason to start with a budgeting framework that allows you to make adjustments as the economy changes.

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