The Number One Reason Churches Fail to Make Their Budget

A few years ago, we were asked to make a presentation to a church about raising capital dollars. In preparation for that meeting, we discovered from the church newsletter that giving was running about 10% below the previous year. Some of that decline was related to a decline in attendance. At the same time, we noticed the church was recommending a budget increase of 10% for the coming year in addition to their proposed capital campaign. Our question was, “Upon the basis of what facts or data are you making this increase, which is a 20% increase over last year’s giving?” By setting their budget so high, they doomed it before the ink was dry on the paper.

Right now, across America, church Finance Teams are beginning to meet to set the next year’s budget. The number one mistake churches make is setting their budgets too high. Why does this happen? Here are a few of the major reasons why.

Too many pastors and Finance Teams are ignorant of past and present trends. Wall Street has a saying that the trend is your friend. When it comes to setting next year’s budget, smart churches check past, as well as present, giving and attendance trends. If, for instance, giving declined in the last year, you probably will not want to increase your budget this year. If you are presently behind, do you historically close that gap by the end of the year? If not, then increasing your budget is risky.

With today’s technology, any church can keep abreast of their giving trends. Knowing your trends in giving and attendance can help you avoid false assumptions which will help set a budget that is realistic and obtainable. Because not knowing your data and trends will lead your team to set a budget based upon…

Unrealistic expectations. Pastors and Finance Teams are often overly optimistic about what their donors can and will contribute. As we write this, America seems headed into another recession. With the price of everything from food to gasoline reaching daily new highs, it would be hard to convince your donors that we are not in a recession. The reality is that often the first thing Americans cut in times of economic uncertainty is giving. With your members already hard-pressed to meet the rise of inflation, now is not the time to propose an aggressive budget increase. What drives churches’ unrealistic expectations? In part, it is because too often churches fall prey to…

Believing need drives giving. In our opening illustration of the church increasing their budget, this was the mistake they made. When we asked upon what basis they had decided to increase their budget, their reply was because their ministries needed that amount. They may have needed to increase their budget by that amount but that doesn’t mean donors will agree or rise to meet that challenge. Your need to hit some budget number will not drive your people to give more. Too often churches act as if setting an increased budget will act as a goal and motivator for members to give more. The reality is it doesn’t. One other reason churches often set the budget too high is…

Mistaking a challenging number for a compelling vision. Your people are never motivated to hit some number on a spreadsheet. Only a few are interested in your budget numbers. The idea that a high number will act as a challenge for the church is a misnomer. What motivates people to give is a compelling vision lived out in front of them. Talk about changed lives and people get excited about giving. Talk about your budget numbers and people fall asleep. We have found that dollars always follow vision. Finally, perhaps the most egregious mistake pastors and teams make is the belief that…

We’ll grow into the new budget numbers. If you are not presently growing at an explosive rate, then this is an assumption that will lead you to disaster. Yet we have found this reasoning in many churches. This is especially true of churches in a building campaign. The thought that additional buildings will mean more people and thus more dollars is a myth, not a reality you can take to the bank. If you build it, they might come, but that doesn’t guarantee they will be back nor that they will give. While transfer growth might bring immediate dollars, the typical new member takes three years to come up to speed with your existing donors. So, growth today doesn’t mean more dollars tomorrow.

We have seen all the above mistakes be made by churches leading them to set budgets beyond their capability to reach. Why is it important that you avoid these mistakes? We will write more on this next week, but one of the cardinal reasons why people give to an organization is they have faith in how the organization handles money. Consistently, year after year, setting and missing budget numbers will only end up discouraging your members. Avoid these common mistakes and you will have a greater chance of hitting your budget numbers in the coming year.