A finding in the 2012-2013 Compensation Handbook for Church Staff indicated that more churches operated in the black in 2011 than in 2010. While that is encouraging, I was alarmed by the percentage of churches that still spend more than they take in.
Across the United States, the percentage of churches spending more than their income ranges from 22 percent (in the Pacific and New England regions) to 36 percent (East-South Central region). That means somewhere between a quarter to a third of churches are spending more than their income. Doesn’t that sound really high?
The article was meant to be good news, but I find it hard to believe that—even after coming out of the Great Recession—many churches still have not learned to live within their means. How is this possible?
Most likely, it boils down to one of two problematic methods of operation:
No contingency. Overspending can happen in a nanosecond when ministries create a budget without factoring in a contingency or savings component. It’s no secret: We can’t spend more than we make without forcing ourselves into debt. Yet churches somehow think that as long as they have a balanced budget, they are fine, even if that budget does not include preparing for the unexpected. In fact, churches that don’t have adequate cash reserves are often forced into survival mode and begin to take their focus off of accomplishing ministry.
Overly optimistic. The second reason churches find themselves in the red is due to overly optimistic revenue projections. Here’s what that looks like: Figure out what you want to spend, set the revenue number to match, and—Voila!—the budget balances. Little effort, research, or thought is put into the projection. (Stay tuned: Help is on the way. Look for our upcoming blog post providing a method of projecting revenue from donations that’s based on sound principles.)
Undeniably, overspending year after year puts a ministry in jeopardy. So, why do you think ministries often spend more than they take in?