Your Top 4 Budgeting Questions Answered

During Q4, budgeting is a top topic on many XP's minds. This month, we want to share the answers to the most frequently asked questions our team is asked. Let's dive in. 

Question 1: How do we forecast income for our budget for next year?

1. Use this year's budget.
   Calculate your forecast for year-end to get a data point to determine how this year may land. This is your best starting place for determining next year's budget.

2. Don't use "what you need."
   Plugging in a number for income for next year's budget based on what you plan on spending is an irresponsible practice in budgeting IF it exceeds your current year's giving forecast by a significant amount. It's like saying my personal income will increase if I purchase a Porsche even though my income shows I can't afford the note. 

3. Let your level of fiscal conservatism be directed by your recent trends in the growth of your giving. 
   If you've had a decrease in giving this year as compared to years past, this isn't the time to increase your forecasted giving. Don't fall into the trap that "Conservative budgeting lacks faith" because God gave us both faith and logic to be exercised and practiced with wisdom. Both must be utilized when managing financial resources.

Question 2: We need to make budget cuts this upcoming year. Where do we start?

1. My first priority is always people.
   People do ministry, not programs. Invest in them first. That's not an excuse to keep around staff who underperform or positions that aren't needed. I'm just suggesting to continue to invest in the staff who greatly invest in the lives of your people.

2. Fixed expenses are your 2nd priority.
   By fixed expenses, I don't mean the $10k annual trip to the Denver Pastor's conference. I'm talking about the things you simply can't do without - utilities, property insurance, payroll taxes, etc.

3. Ask your ministry leads to be creative and a part of thew solution.
   Let them provide you with their budget which is X% down from the previous year's budget. This requires you to be transparent about where the finances landed for the previous year(s) and gives them an opportunity to prioritize what really matters to them.

Question 3: We gave a big cost of living adjustment in 2023. What do we do in 2024?

1. Just do it.
   Don't get hung up on which method or calculation to use. Just make sure you stay on top of it and make it a priority. Just because you did what you needed to last year to take care of your employees doesn't mean you should slide back this year. That just gives you more to make up at a later date. Remember that your people are doing the ministry. Without them, you can't do what you do. Take care of them.

Question 4: Despite our staff having a budget, they continually go over each year. How do we prevent this?

1. If your staff don't get weekly reports on where they are vs their budget, they are starting at a disadvantage.
   Giving them accountability around their spending without regular updates is like taking away your ability to view your personal bank account online. If you can't review it, how do you know if it's accurate, if you're on track, or what you have left to use? Furthermore, if your accounting system doesn't allow for automated weekly reports or the process in which you update transactions doesn't allow for weekly accounting, it's time to make a change.
2. Put consequences in place if they exceed their budget throughout the year.
   If your student pastor is at 80% of their budget 4 months in, have a conversation, turn their card off, and put guardrails in place to enforce the budget. If they can't follow the same guidelines as every other staff, find someone who can.
3. Never "let" an area overspend on a consistent basis.
   If your church is primarily focused on college students, there's still no reason that they should be allowed to overspend when the children's ministry can't. Be reasonable, be proactive (by giving them the budget they should be allowed to spend), but be consistent. Allowing one ministry to overspend and not others tells your whole team that policies don't apply if you're in certain seats on the team. That mentality will get you in trouble in a hurry.

What other questions do you have about budgeting? We'd love to schedule a call to discuss them!