Faith and Finances

A church budget is an action plan for the ministry and mission of your church. There are three different budgeting processes for the preparation of a church's annual operating budget: (1) Incremental budgeting; (2) Zero-based budgeting; and (3) Program budgeting. Find out more inside...

Incremental budgeting, often called line item or traditional budgeting, is based on the previous year's expenditures. Most churches follow this budgeting process. Incremental budgeting takes this year's budget as the basis for next year's budget and makes adjustments to each item for anticipated cost increases or activity changes.

Zero-based budgeting starts every program and activity at zero dollars. This budgeting process is similar to what's used by the executive branch of the U.S. government. The government annually reduces all budgets to zero, making it necessary for every department to justify all financial needs for the coming year.

This is a very challenging and time-consuming process. However, it is useful for churches whose programs and methods of operation carry forth year after year without question. Some suggest zero-based budgeting as a useful approach about every five years to provide a fresh look at all programs and activities.

In program budgeting, all programs and activities are evaluated, based on effectiveness at their current levels of funding and on their potential. The church identifies each program or activity, the needs each program serves, and the past effectiveness of meeting those needs.

Finances always are a delicate subject in any church. Without adequate funds, a church cannot continue to minister effectively. Part of an effective ministry is meeting your financial obligations.

It is important to protect your church's reputation in your community, to your bank, staff and vendors. It is a sad situation when a church does not pay its bills on time or has to ask its staff members to hold their pay checks until after Sunday's offering.