Types of Budgets

There is no one way to do a church budget.  There are a variety of approaches and for the most part, no one way is better than the other.  Remember mission and vision?  These two factors will also impact how a church goes about its financial planning.  I do have to point out however, that even though I say there is no single way to do it right, there are definitely ways to do it WRONG.  I have included one of these “must to avoid” approaches in this post.

Here are some of the more popular types of budgets:

  • Program Budget – Organizes proposed expenditures in terms of the cost of each program to be carried out
  • Performance Budget – Emphasizes measurable performance so that input costs can be compared with output benefits
  • Line Item Budget – Budget amounts carry over from the previous year and are then adjusted to current year expectations.
  • Zero Based Budget – Prior year amounts are “zeroed out” and we start all over again…
  • Ministry Budget – Dollar allocations are based on ministry goals for the year. 
  • The “Dream Big” Budget…..

As I mentioned above, most of these approaches work effectively.  However, in my opinion, I need to express my skepticism about two, one should be approached with caution, the other should be avoided.

  • The line item budget has one weakness.  Just rolling the prior year forward can be dangerous if the church does not have some type of review of the effectiveness of the ministry each year.  If no review is present, churches may continue to fund projects that have not supported the important missions and visions of their congregations.
  • The “Dream Big” budget should be avoided.  Churches that use this system instruct their ministers to come up with a budget for what they want to do the next year “if money were not an object…”  Invariably this approach leads to unrealistic budgets and worse, unmet expectations, resulting in discouragement of both the staff and congregation.

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