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Responding to Financial Realities
Responding to Financial Realities
What to do when either giving or expenses—or both—don’t go according to plan.
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Have you ever created a budget that was perfectly on target? Did you end a year and realize revenues and expenses were exactly what you expected?

If so, you are among a very rare group of people—and it almost certainly hasn't happened more than once. In Church Finance Today's survey of more than 2,000 churches last year, 41 percent of churches said giving was higher than expected and 29 percent said it was lower than expected, meaning 70 percent of churches probably came in above or below their adopted budgets. Coming right in on budget usually is the exception, not the rule.

That means it is smart to create contingency budgets that define what will happen if various changes in funding occur during the year at your church. From a primary budget, build one that is a certain percentage lower and build another that is a certain percentage higher. Doing this can minimize controversy later. If you find yourself above or below budget, you're already ready to act with cuts or additions based on the overall vision of the church—not on the basis of who asks or complains the loudest.

Four Common Scenarios

A budget is a tool but it doesn't guarantee results. The following four scenarios are the most common for churches to face during the course of a year:

Giving below budget, spending above budget. This is obviously the most difficult scenario. Hopefully, your church built up necessary reserves to carry it through times such as this. Every decision must be weighed carefully. Use caution to avoid short-sighted decisions. Instead, consider the unintended consequences of each cost-saving decision you make.
Giving at budget, spending above budget. Donations are in line with projections. That's encouraging. But spending is more than budgeted. That's tough from a cash-flow standpoint. This situation can easily arise when there is growth in attendance. It often takes newcomers about 18 months to begin financially supporting a ministry, but expenses related to serving them are immediate.
Giving below budget, spending below budget. This scenario may not be ideal, but it isn't threatening to a church. If both giving and spending are below plan, it is typically because intentional cutbacks have been made to align spending with giving. That is prudent. But exercise caution with the cutbacks as well as any unintended consequences from those cutbacks.
Giving above budget, spending below budget. What an envious scenario, right? But it can present its own challenges. What do you do with the excess? Will donors see it as a positive reflection of financial management? Or will they think their money isn't needed? Make sure you know what you will do with extra revenue; perhaps it's the establishment of needed reserve funds or the replacement of outdated equipment. Whatever the plan, make sure you communicate what your church plans to do and why continued faithful giving is so important.
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