10 Financial Ratios (part 4 of 10)

Budget percentages

  1. Definition: determine what percent of your annual budget goes to the three categories of church expenses
    1. Building: utilities, building & grounds maintenance and improvements, building insurance, debt payments, and anything else it takes to operate the physical structure
    2. Staffing: all personnel costs regardless of where the staff is budgeted for (you may have custodians in the building budget but they are a personnel expense)
    3. Programming: all expenses related to why the church exists including worship & music, care & fellowship, discipleship & education, missions & outreach (including funds budgeted for a denominational entity)
  2. Results
    1. Building: should be about 20% (plus or minus 5%)
    2. Staffing: should be about 50% (plus or minus 5%)
    3. Programming: should be about 30% (plus or minus 5%)
  3. Consequences
    1. Building: if this is too low you, may be deferring a lot of maintenance; if it is too high, you have more building than you can support
    2. Staffing: if this is too low, you may not have sufficient staff to do the job; if it is too high, you’re not using enough volunteers
    3. Programming: if this is too low, you are cutting your reason for being; if it is too high, … I’ve never seen it too high but make sure you’re paying your staff appropriately and taking care of the building properly

Now What? So What?

  • Compare your church’s financial ratios to the optimum range for each ratio.
  • Develop a 2-3 year plan to bring your ratios in line with best financial practices.

 

Lead On!

Steve

Comments

  1. Sue Black says:

    Steve, when you say “annual budget”, do you mean total receipts (not just operating)?

    • Annual budget is the planned budget to accomplish it’s goals which means the operating budget that, in most cases, the church members vote on and support with their gifts. Other receipts fluctuate (often greatly) and the church has less control over their internal use. For instance, designated gifts to a youth ministry are great but they fall outside the church’s budget.

  2. Where do administrative costs fall?

    • Admin expenses for the most part support programming (not staffing or building) so they are classified as programming. This includes postage, copier costs, paper & supplies, and way too many other things to list.

  3. one more on this topic – we pay apprx 13% of our operating budget to our “parent” conference; this supports admin at the conference level, as well as some missions, seminary support, and retired clergy benefits. Would this go under programming?