Budgeting

Accountability and Budgeting – You Have A Budget, Now What?

You Have A Budget, Now What?

Accountability 3

Budgeting is such an important tool for so many reasons. In his book, Essential Guide to Church Finances, Richard Vargo lists 10 important reasons:

  1. Formalizes planning
  2. Reduces emotion-charged discussions
  3. Provides a basis for performance evaluation
  4. Serves as the basis for control and provides the necessary authorization for spending money
  5. Assists in communication and coordination
  6. Involves the membership in the planning and approvals
  7. Increases communication in giving
  8. Generates confidence in church leadership
  9. Allows for continued operation when cash receipts and disbursements mismatched (i.e. understanding cash flow).
  10. Allows time to lend or borrow prudently. (i.e. plan for overages and/or shortfalls)

But if church leadership puts the budget aside after preparation until the next budget cycle, what good have you done? How should this formalized planning tool be used during the operating year?

Empowers Ministry Leaders

During the budgeting period your ministry leaders have detailed their goals and justified their expenses. So, now it’s your job to trust them. Empower them to go out and achieve those goals by allowing them to make financial decisions, i.e. expenditures, as long as they are functioning within their budget guidelines. You are giving them the authority to enact the programs that the leadership and church, as a whole, have agreed are your mission.

Ensure after the budget is approved that each ministry leader is given, in writing, their authorized amount of expenditures per program and the accounts they are to use when submitting receipts or check requests for their programs.

Creates Confidence and Faithfulness in Giving

As your church progresses through the year, a weekly or monthly reminder of the programs approved by the congregation and the funds necessary to achieve them against what has been received is a strong, but friendly reminder to the covenant made when the budget was approved. And, in turn, seeing the financial results quarterly, i.e. a comparison to what has been spent against what was approved builds confidence in the leadership team of your church.

This can be included at the bottom of your weekly bulletin, or your website or in your newsletter.

Provides means of Financial Control

A monthly Actual vs. Budget report should be produced for church leadership. I like a report with these columns:

Current Month $ Budget for month $ YTD $ YTD Budget $ Budget % Spent

If you think about it, each month actual receipts and expenditures should be about 8% of the budget. So, for example, in March you expect to see 24% +/- as the Budget received/spent for the year. It gives you a quick way to instantly see line items that are out of control. Now, of course some line items are seasonal. For example, Mother’s Day Out may not operate in the summer, so for the summer months the % spent will not change, but you will catch up later in the year.

It is this monthly and YTD number that you would communicate in the weekly or monthly reminder mentioned above.

  • Are you giving your ministry team leaders the information they need to manage their program budget?
  • Do you have the right financial information reported to you automatically each month?
  • Who is responsible for reviewing this report and asking questions? Are they documenting their review?

GoodBooks’ bookkeeping software will automatically create this report for you each month. Your ministry team leaders can submit their receipts by smartphone to the software and the receipt is stored with the accounting transaction. Are you still using a spreadsheet? Are you manually reconciling your checking account? Are your financial records up to date? We want you to have good books! Contact GoodBooks today.

Read our other budgeting blogs for more information.

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