[See last week's post for part 1.]
6. What are the percentages that should be used as a rule of thumb?
A church spends money on three things and the rule of thumb is that you should spend the following ranges on each of these areas:
- Staffing: 40-60%, ideally about 50%
- Programming: 20-35%, ideally about 30%
- Buildings: 15-25%, ideally about 20%
Percent of WHAT? There are two ways to measure this
Operating Budget – the budget is an easy and pre-defined way to measure. These percentages can be seen even before the first dollar has been given to the budget for that year.
All Actual Receipts – a better way is retrospective by looking at the prior year’s expenses on all areas and all receipts. This is more complicated but it gives a better result.
- Look at ALL RECEIPTS not just operating budget (all monies received for all causes and purposes): operating budget; mission offerings; events, trips, and activities; food service; designated gifts; etc. Count everything that comes in.
- Look at ALL EXPENSES for each area. There are many expenses paid from designated funds which are not part of the operating budget. Count all those expenses.
- Do the math to get the most accurate percentage of where the church is spend all of its money. Most churches will end up spending far less on staffing and building than what is in the operating budget and a lot more on programming.
7. What about capital budgets?
- Capital budgets are monies that are used for major building expenses such as new heating and air conditioning equipment or gutting and overhauling rooms.
- Capital expenses often don’t fit into the operating budget and thus are paid from capital campaigns, the generosity of some members, creative finances, funds leftover at the end of a fiscal year, or a combination of some or all of the above.
- Most churches cannot afford to put a line their operating budget for capital expenses – their current operating budget is too tight. However, all churches must face the reality of capital needs and thus must have a plan for how to handle these expenses.
- All churches should have a list of capital needs facing the church over the next ten (10) years. That gives the church’s leadership an idea of how it needs to plan financially to face the certainty of aging equipment, leaky roofs, inefficient heating units, etc.
8. Can you use designated funds in the budget development process?
Yes and you should. Some people prefer to give to specific purposes and not to the operating budget (a better term is “Ministry Budget” or “Mission Budget”). It impossible to pre-determine how much will be given to designated funds but you can have an educated figure.
Designated funds are secondary, not primary sources of the budget for that purpose. Plan your operating budget first and then plan the “what-if opportunities” for monies given to the designated fund.
9. To whom is the budget presented?
- The more the better. Tell as many people as possible about the budget. The more people that know and understand the goals of the budget, the more “buy in” you’ll have when it comes to funding the budget.
- Use different times and places. Be creative in how, where, and when the budget information sessions are held. Different groups meet at different times, so leverage those meetings. Use different people to do the talking, too – it shouldn’t ever be the same person doing all the speaking.
- TELL STORIES – budgets are never about numbers. Budgets are ALWAYS about people. So, when you make the presentations, tell the stories (beginning, middle and end) about how people will be changed and helped because of the money given to the church.
10. How do you anticipate and prepare for the questions will you get?
You can’t. But you can be prepared by knowing as much about the budget, its process, and its leaders as possible. Don’t spend time trying to anticipate questions; spend time with people (especially young leaders) so they’ll understand the goals of the church and how the budget plans to work toward those goals.
When you have Q&A times with the church, don’t let just one person handle all the questions. Ask all committee leaders (missions, worship, youth, education, etc.), all Finance Committee members, all staff ministers, and other key leaders to come to the platform.
- The church will then get to see who made the decisions regarding the budget. Usually, those are a score or more of trusted leaders, not just one committee working in isolation.
- The people on the platform can best answer detailed questions about their respective area. The Budget Committee leader may not know why the guest musician budget line has that figure, but someone else does.