When COVID-19 became a reality, it disrupted nearly every plan and strategy that existed in the church world.

The carefully constructed “2020 Vision” plan? Gone.

The capital campaign plan? Derailed.

The new ministry plan? Paused.

But perhaps the plan that was thrust into the most chaos was the finance plan. The budget that existed before March 2020 certainly won’t be the budget that helps us finish 2020.

Overnight, the forecasts and spreadsheets were outdated.

Our plans to spend money were halted as we tried to figure out how long it would all last. We hoped the adjustments we made would be enough to compensate for a drop in tithes and offerings.

As I’m writing this in the middle of 2020, churches are still uncertain about if or when things will return to any type of normal.

Even if we made quick adjustments, it’s time to revisit our financial plan. In light of everything we’ve learned over the last few months, our current circumstances, and where we prayerfully want to go as a church, we need to build a new financial model.

Money and the church is always a tricky subject.

It involves both financial experts and communications professionals. You have to raise, manage, spend, and talk about money the right way.  So even in the best of times, this is a tough topic to navigate.

Covid just made it crazier.

To help cut through the clutter, I want to encourage you to build (or rebuild) a financial plan around two key documents.

While no one can guarantee the future, these two documents are COVID-proof, meaning they will flex toward whatever comes your way.

Let’s take a look at the two documents that should make up your church's financial plan.

Document #1: The Spending Plan

In a normal year, the budget might feel like wishful thinking, a spreadsheet that’s built on the hopes of ministry leaders and pounded into reality by a finance team—neither of whom truly know what to expect.

For most churches, the budget is a written guess of what we think will happen. It’s a quasi-guide on how we plan to spend the money we hope comes in. We look at giving from last year, add or subtract a little bit based on a cursory view of a financial report, and then lock it down for the next fiscal year.

That’s a mistake in any other year. But this year…it’s a recipe for disaster.

More than ever, you need a plan for how you’re going to spend church money. In fact, I prefer the term “spending plan” to the term “budget.” Maybe it’s just semantics, but “spending plan” sounds like it’s rooted in ministry while budget feels like it’s rooted in accounting.

But no matter what you call this document, you need it. And you need to update it.

Before you crack open the spreadsheet, I want you to do two things. These are the difference-makers. This is how you turn a one-time, COVID-related adjustment into a healthy practice that will serve your church well for years to come.

First, clarify your budget philosophy.

There are three primary budgeting philosophies used by people, businesses, non-profits, and churches. You have to pick one before you do any work.

  • Incremental budgeting starts with what happened last year, then makes minor adjustments. Many churches choose this approach. They look at last year’s budget and say, “We believe we could do 3% better this year, so let’s lock that down and pray that God blesses it.”
  • Program-based budgeting is a variation, but instead of bumping everything up or down, it rewards programs and ministries that are more effective and eliminates line-items that are deemed less successful. It’ still a form of incrementalism but it’s tied to activity and results, not just the economy.
  • Zero-based budgeting effectively starts at zero every year and asks every program, ministry, department, or leader to build a new budget based on priorities and mission. Every expense for the upcoming budget period has to be re-justified.

Which philosophy are you going to choose? There are merits to each, but you should let a guiding philosophy drive your discussions.

Second, clarify your budget process.

Once you know the philosophy behind building your budget, you should clarify your process. I can’t stress this enough. It’s so important.

Before you start changing numbers on an Excel file or running reports, document your process.  Decide HOW you’re going to decide.

This is what takes the pressure off. This is what removes stress.

Your process should answer the following questions:

  • Who is going to be involved? Karl Vaters writes, “One of the biggest mistakes small churches make with budgets is designing them in a back room, then announcing it as a done deal to the people who have to live with it.” Make sure your process involves all of the right people.
  • What timeline are we going to follow? I have a suggested timeline for you below but create this once and you can use it year after year. After a while, it will become second nature.
  • How will we communicate to leaders and/or the congregation? Releasing the budget doesn’t have to be a boring necessity. You can actually use it to cast vision for where you’re going. It requires planning and creativity, but your budget process can actually be laced with exciting vision for the future.

And it might look something like this:

September (Preliminary work)

  • Ministry and program evaluation, including financial reporting
  • Review the previous year and discuss vision for the upcoming year at a pastoral leadership retreat
  • Update the Two-Page Plan (mission, vision, values, strategy, etc.)

October (Financial models)

  • Review reports, trends, and forecasts
  • Distribute budget request packets to church staff and leaders charged with budget responsibilities
  • Collect and analyze all budget requests and schedule any follow-up conversations

November (Draft budget)

  • Develop preliminary budget
  • Communicate approvals and preliminary budget with staff and leaders

December (Finalize budget)

  • Adopt the budget and communicate details with staff and leaders

You don’t have to follow this exact process, but what you should do is clarify your own.

When you have process documents, you can assign real dates each year. You can even include regularly scheduled budget reviews and updates throughout the year so you’ll have planned time for making adjustments.

Adjusting Your Budget When Things Change

COVID-19 might have caused you to take a fresh look at your budget. This has beeen a pretty significant adjustment period for churches.

But chances are, you’ll go through other adjustments.

A large group of donors might leave the church. Maybe the community around the church experiences radical and swift change. Maybe you start a new ministry with new expenses.

When you need to adjust your budget, I want to encourage you to start with these three areas.  These principles actually hold true for every budget season. They are just particularly helpful when needing to trim.

  • Start with your staff. For most churches, your staff is your biggest expense. That makes this the first place to look when you need to trim expenses.You might choose to make an across-the-board cost reduction. You may ask people to make voluntary changes. You may choose to reduce headcount.No matter what you choose to do, remember that clarity is kind. If you’re worried that staff changes are coming, you can communicate clearly about what would trigger an adjustment. You don’t have to have all the facts to start talking about change.
  • Look at your facility. Your building costs are probably the biggest or second-biggest part of your budget. So, when you need to cut costs, look here next. If you have a loan, talk to your lender about deferral options (don’t ask for forbearance; ask for deferrals). If you have unused space, talk through options for generating extra income.  Anytime you have a big expense in the budget, see if you can find ways to turn it into an income-producing line item.
  • Fund your keystone ministries first. If you’ve been through the Building Your Ministry Plan course at Church Fuel, you know how important this is. Honestly, this one exercise is worth the subscription. There are programs and ministries that drive growth in your church. And there are things that exist but don’t really help accomplish your mission. Wise leaders fund keystone ministries and work to simplify or eliminate everything else. This can be tough, which is why going through the course and talking with a coach is helpful.

When it comes to budgeting, embrace your role as the Chief Clarify Officer.

Nothing communicates a church’s priorities and mission more than the budget. It’s putting your money where your mouth is.

Document #2: The Funding Plan

Even if your budget needs tweaking, you probably have a budget.

And even if your process is a little tired, there’s probably a process.

That’s because budgeting is a very normal part of church finances. A lot of work goes into making the budget, the document that shows how money is planned to be spent.

But do you know what’s an afterthought in many churches?

Where the money is going to come from.

Churches are usually okay at creating spending plans, with decent systems in place to make sure the money is spent properly, with proper approvals, and decent reviews. But spending is just one side of the financial plan.

You actually need a plan to get the money.

Think about this as your other budget. It’s the funding plan to go along with the spending plan.

The funding plan is a month-by-month look at the income side of your budget. If you were a business selling widgets, it would be the sales forecast. If you were in real estate, it would be your rent schedule.

As a church, your income comes because people are generous.

But you still need a plan and you still need a strategy.

What would happen if we shifted some of the time spent on the budgeting process into time spend discussing funding options?

What would happen if your financial leaders took a posture of facilitating financial growth in addition to the posture of being guardrails to overspending?

What would happen if you were just as intentional about creating a funding plan as you were about creating a spending plan?

If you’re a Church Fuel member, you’ll find an Annual Funding Plan template and a coaching video you can watch with your team. We’ll show you exactly how to create it and how to navigate the tension between planning for income and waiting on God’s blessing.

But to get things started, here are some things that can go on your plan.

  • A stewardship or generosity message. February, May, or November are great times for this.
  • Financial education classes or groups. When are you going to strategically help people win with money, get out of debt, and understand total-life stewardship?
  • A digital giving campaign to encourage people to move toward automated, recurring giving. May is the best time of year for this and you guessed it…there are resources to help you, Church Fuel members.
  • A donor appreciation event. This is when you gather all of your donors (you can include volunteers, too) and just say thanks. Let your core leaders know where you’ve been, what they’ve helped accomplish, and where you are going. You can make it fun and keep it relational. Summer is a great time for this.
  • Donor communication. When are you intentionally communicating with your donors? We suggest monthly emails, quarterly mailers, and annual statements. Communication builds trust.
  • Special offerings. Once per year, you can lead your church to participate in a special offering. It could be for something inside the church or community-facing.

These are just a few of the “tactics” you can use to talk about money and be intentional about facilitating generosity in your church. As you can see, they aren’t about spending, reporting, or managing. They’re about increasing, encouraging, and fanning the flames of generosity.

These are funding activities, not spending procedures.

This isn’t the job of most finance committees, but there are probably people in your church who could help you here. Find people with a growth mindset to help you process ideas and make real plans to facilitate generosity in your church.

At a minimum, challenge your existing finance or stewardship team to spend some time on the funding side of the finances.

Working on a funding plan is an important exercise that will help you proactively meet or exceed the budget.

A Complete Financial Plan

The spending plan and the funding plan are the two key parts of your financial plan.

The first document will help you ensure that you spend resources wisely. The second will help you focus on how you’re going to receive the money.

Once you have both sides of your plan, build a regular reporting rhythm, adjust as needed, and manage the income and expenses with purpose.