Using Budgets For Reporting
Once your church has a working budget, you can leverage it to gain some quality insight into the financial health of your church. During this course, we are going to look at taking the budget you created and combine it with the financials from your accounting software to get an overall picture of your church’s health.
Types Of Budget Financial Reports
A budget report is an internal report used to compare the estimated, budgeted projections with the actual number recorded during a specific period. In other words, a budget report is designed to compare how close the budgeted amount was to the actual amount during an accounting period. Here are some of the most common ways to look at these budget to actual reports.
This compares your actual income and expenses to budget totals for the current year. It will show you if your current overall spending is similar to what happened last year, if that was planned, and if it smooths over the fluctuations of each month.
- Current Month vs. Last Month
This compares the past two months to help you identify recent unexpected income or expenses that will affect your budget so you can make faster adjustments. For example, you can look at February this year versus January this year.
- Current Month vs. Last Year
This compares one month to the same month of last year. Since the timing of income and expenses tend to follow a similar pattern each year, it can help you identify if something came in that you didn’t anticipate. For example, you can look at February this year versus February last year.
- Comparative To Last Fiscal Year
This compares the current year to the previous year, such as 2018 versus 2017.
Things To Ask When Reviewing Your Reports
- Are you meeting income and expense estimates?
You spend all kinds of time collaborating with people in your church to come up with goals. Are you meeting them?
- Are you meeting your cash flow projections?
If you factor in your net income, do you have as much cash as you planned for? If not, why? Was there a transaction that missed your income and expenses, like selling a property? Something like this would have missed your expense categories but increased your cash.
- Are you over or under on either of the above? What are your variances? Are they accurate and reasonable?
Do budget totals need to be adjusted to reflect anything?
It Takes A Village
Just like it takes a team to prepare a budget, it also takes a team to review and adjust your budget. As always, make sure your church has an established process for when to review your budget and make necessary adjustments to respond to unexpected expenses or slow seasons of giving. This is an important piece of financial leadership that should be communicated across all ministries of your church.
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