Accounting for ministries

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How to Apply Accounting to Ministries: Zooming in on Your Church’s Budget

Church accounting is more than an organization-wide activity. It takes into account individual ministries within your church, as well.

When you apply accounting principles on an individual ministry level, it makes it easier to understand what each area of your church is really spending. This helps curb out-of-control behaviors and makes it easier to set ministry budgets.

Here are a few tips to help understand the role that ministry accounting plays in keeping your church’s finances healthy and equip you to set accurate budgets for each of your ministries.

Unique Aspects of Ministry Accounting

It’s important to remember what you’re trying to accomplish when applying accounting on a ministry level. Remember, as a faith-based non-profit, the goal is never to increase profits or revenue.

Instead, churches and their individual ministries should use accounting as a way to improve their financial stewardship. Applying basic accounting principles on a ministry level makes it easier to set expectations and stay accountable. It creates financial parameters within which ministry leaders can operate and ensures that everyone maintains transparency over time.

Setting a Budget for a Ministry

There are multiple ways to set budgets for a ministry. Each has its merit, and many are tailored to specific church sizes or circumstances. However, there are a few themes that remain the same throughout ministry budgeting. Here are a few things to consider when setting your church’s ministry budgets.

  • Start with prayer: This is always ground zero for church finances. Seek the Lord’s wisdom regarding how your church should invest in each ministry.
  • Consider past data: What money has this ministry required in the past? What have they done with it? These create important benchmarks for future budgets.
  • Consider comparable data: Is there public information available regarding how much comparable ministries spend in this area? (This is particularly helpful if a ministry is new and doesn’t have past financial data to work with.)
  • Forecast future needs: Setting clear financial goals is more than an organizational objective. You want to consider what each ministry is trying to accomplish — and the price tag that could come with those efforts.
  • Review the larger church budget: A ministry may require a certain amount of money to run properly, but does that fit with your larger church budget? How much should you prioritize each ministry within that budget?
  • Set a budgeted amount: Once you’ve reviewed past data, current resources, and future needs, set a budget for your ministry. Then give the leaders of that ministry room to spend it as they see fit.
  • Review after the fact: Remember to follow up and review a ministry’s budgeted expenses once a financial cycle is complete. This spills over into the “consider past data” phase as you begin the next budget, starting the cycle all over again.

If you follow these steps, you can create thoughtful, responsible, and empowering budgets for each ministry that your church runs.

A Ministry Budgeting Example

As an example, consider a Youth Ministry at a midsize church. This is a good one, as youth ministries often have the smallest budgets and the biggest plans. 

At the beginning of the annual budgeting phase, a church’s administrative team spends some time praying about how God wants their church to invest in this teenage element of their ministry this year. They also look back and consider how much the ministry spent last year. (We won’t put a specific number in here, as every church has different resources and priorities.)

They also conduct research on what similar youth ministries are focusing on. This research reveals recreational activities like pizza parties, movie nights, and ski trips. It also takes into account a local missions trip that the youth went on the previous year.

From there, the team works with the youth ministry leadership to understand what goals and objectives they have for the coming year. They find that this year, along with a pizza party and movie night, they want to add two events where they rent a bowling alley and organize a ski trip as outreach opportunities. At the same time, they are planning a repeat of the missions trip, but it is scheduled for the following year.

From there, the team considers the church’s existing budget and finds that things are fairly comparable to last year. They gauge the cost of the new events, remove the expenses of the missions trip (with a note to add them back next year), and set a budget. They also schedule a date to reconvene and review the budget early in the following January.

Other Ministries That Need Accounting Accountability

Of course, youth ministry isn’t the only ministry that can benefit from a budget. Here is a list of common ministries that require proactive financial planning. 

  • Preaching and teaching
  • Praise and worship
  • Children’s ministry
  • Guest services
  • Local outreach
  • Domestic and international missions
  • Counseling

Some of these come with hefty payroll costs. Others are fairly simple. All of them deserve attention.

Setting the Financial Stage for Your Ministry to Thrive

Even small church budgets are multi-faceted financial plans. Each part deserves attention, including accounting for individual ministries.

As you address priorities like payroll and bookkeeping, remember to give each ministry a budget. If you need help with the process, contact our team of Christian CPAs for insights and a helping hand. 

Trust us, investing in each ministry’s finances is well worth it. It will bear fruit both now and far into the future.

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