The Financial Plan (a.k.a. The Budget) is one of the most important documents that a church leadership team produces in a giving year. In studying a church’s Financial Plan it is easy to tell what their vision and priorities are. It is also easy to tell how fiscally responsible they are. In this blog, as the title suggests, I want to give you a general plan for creating an annual financial plan.
This post is essentially a continuation of lasts week’s http://2thesource.org/2015/09/13/a-plan-for-annual-planning/, which was built upon http://2thesource.org/2015/08/13/the-misty-realms-of-theory/, that was about clarifying mission, vision, and strategies. By putting these blogs all together a church leadership team will have a very solid working plan for a coming year. Putting these steps in the suggested order is super important. To create a financial plan before clarifying the vision or outlining a calendar would be like purchasing gasoline before you own a car. In other words, it is a little premature.
Let’s start in the finance office. First, the finance office should review and update the chart of accounts; bearing in mind ministry changes, personnel changes, etc. Second, the finance office should create the template that everyone will use to put their budgets together. The template can be produced straight from the accounting software, from MS Excel, Google Sheets, or Mac’s Numbers. Regardless, there should be uniformity to the software and template used so everyone is working from the same platform. This is important because the church leadership will have to review the individual budgets at some point. If they are built from different software or formatted differently, time will be wasted trying to interpret and then reorganize each individual budget. Third, the finance office needs to gather the historical information on income and expenses. I suggest the two years prior as well as year-to-date information through the third quarter. All of this is then distributed to the ministry team leaders who are responsible for establishing their financial plan for the coming year. Give everyone a date by which they should have the first draft turned back in.
Since the mission, vision, strategies, objectives, and calendaring have already been laid out the ministry team leaders are simply working with numbers at this point. First, month-to-month income needs to be projected. Using the historical data, noticing the trends, and having faith the lead team can establish the income portion of the financial plan. This would include Tithes and Undesignated Offerings, Missions, Capital Campaign Funds, Use of Facilities, Etc. Note: The individual ministries will establish their income based on their plans (as well as their expenses).
While the team members are working on their first draft the leadership team is looking at compensation, considering increased costs in insurances and contracted services (e.g. landscaping, accounting, janitorial services), leadership development cost, and capital costs (e.g. computers, remodeling, A/V equipment, etc.), major maintenance projects (carpet or roof replacement, parking lot maintenance, HVAC repairs, etc.). In the mix of all this figuring the leadership team is also determining how much the “general fund” will subsidize the individual ministries.
Once everyone has submitted their first draft the numbers are all plugged into the software and the financial plan as a whole is given to the leadership team. If it is given to them in hardcopy form be sure to print it in color so they can see the red ink! Inevitably there will be quite a bit of it. People have been dreaming big. Now the dreams have to be tethered to a given year and put into the perspective of the whole church. There is a reason we call it the “first” draft. You guessed it, draft number two is forthcoming. When giving the individual budgets back to the team leaders for draft number two it is a good idea to give them an idea of where they should be with regard to a subsidy. Whether there are subsequent rounds of drafts is up to each leadership team. I don’t like to do the back and forth thing too much. It doesn’t seem like a good use of anyone’s time. The bottom line is the bottom line so let’s get to it as efficiently as possible.
The church’s governance and structure will determine some of this process. The Elder Team or Board of Directors may have a hand in developing the Financial Plan. More than likely they will be the ones to review and approve it. Once it is approved it should be followed, BUT it is just a plan. It is not a mandate. A church leadership team should remember that they created it and they can change it. This, of course, must be done with wisdom and in submission to the appropriate authority, but opportunities for advancing the Gospel will arise within a given year that were not foreseen when the Financial Plan was being put together. These opportunities shouldn’t be neglected due to some false sense of being absolutely bound to the Financial Plan.
From start to finish this process takes a few months. At times it seems tedious, but don’t allow yourself or your team to cut corners on it. This is about stewardship. Jesus expects those he has charged with overseeing his church to be faithful in these matters.
 I realize that I use “etc.” a lot. I do this to keep the blog shorter and because I’m being lazy, not wanting to think of every possible things!