5 easy tactics for cutting costs in your budget

While I despise many staff and departments only see the accounting team as frugal big brother, it's hard to escape the truth that cost savings is a part of the role. Here are 5 simple tactics you can use to cut costs in your budget:

1. Have ministries prioritize their wants/needs for the next annual budget.
2. Monitor ministry budgets more than once a month.
3. Get ministries to run an expense analysis each quarter.
4. Leverage the tax breaks given to churches (and pastors).
5. Consider outsourcing activities that are a fit for remote work.

Have ministries prioritize their wants and needs for the next annual budget.

Despite the difference approaches to annual budgeting, most churches give their ministries an opportunity to present budgets/requests for the upcoming budget. Hopefully, those requests directly tie to the vision of the church and how it applies to their particular area. What we find extremely helpful is to ask them to prioritize those requests into three different categories:

• Mission critical: Absolute musts to the pursuit of our vision.
• High priority: Important to the pursuit of our vision
• Medium priority: Helpful to the pursuit of the vision. 

Once you've collected these requests and you and your team prayerfully consider next steps, it prevents you from trying to guess what you ministries think is most important. It also allows you some insight into the thought process of your teams. It can often lead to great discussions on where there might be misalignment or breakthrough insights.

Monitor ministry budgets more than once a month.

Simply put, the more up-to-date you can keep your ministries informed of their progress, the better they can manage. The same is true with their finances. If your ministries only get a monthly update of where they stand financially, typically 15-20 days after a month has closed, there's no way they can manage those finances with intentionality without extensive efforts on their part. And to that end, most ministry directors/pastors/dept. leads weren't hired for the financial management prowess. So where does that leave you?

You accounting department should be providing preliminary financials every 7 - 14 days to your ministries. We have too many advanced systems and software solutions available to us to prevent us from making this a reality. "But these financials are not reconciled and have not been double or triple checked..." No they haven't but I'd rather provide ministries with an on-going indication of where they stand on a regular basis than giving them concrete data when it's really too late to do anything about it. Might it require some changes in the systems or processes currently being used? Very likely, but you can't imagine the efficiencies some of these changes could provide. 

Not sure where to start? Shoot me an email and I'll give you some of the tools we use to give churches weekly updates that allow them to be only about a week realtime reporting.

Get ministries to run an expense analysis each quarter.

An expense analysis is an exercise that is often useful to eliminate unnecessary charges from the budget. This usually is in the form of each employee printing out the most recent month's charges that they are responsible for (whether credit card statement or bank statement) and walk through them line by line and identifying whether charges are:

• One-time charges
• Recurring charges to keep
• Recurring charges to eliminate

Once they walk through those on their own, they submit them to their ministry lead/director/pastor to compile them all for the department (total time around 30 minutes). The ministry lead does the same if there is a ministry-wide account with transactions (Total time around 1 hour if he/she is familiar enough with all activity on the account. At the end of the exercise, there should be a list of items that are one-time charges, recurring charges to keep, and recurring charges to eliminate. Over the next 30 days, the departments eliminate those unnecessary charges and submit the report over to the accounting team (Another 1 hour to make the changes and update the report). This gives everyone an opportunity to audit their spending and make sure they're being good stewards of the resources entrusted to them. This is not an exercise to challenge the spending of staff or departments (unless there are outliers or trends seen that may be unhealthy). 

We understand taking this time to go through transactions seems overly detailed to save on an Apple charge here and there; however, you'd be surprised how many charges come across the credit card feeds for services not being used because sometimes it's easier just to code the transaction than to go to that vendor and end the subscription. Now multiply that times every staff and you have a considerable cost each month for un-used services. Give it a try and see if you don't free up some resources.

Leverage tax breaks given to churches and pastors.

I won't do a deep dive into all the different ways churches (and pastors) are taxed differently, but suffice it to say that when done properly, there is a SIGNIFICANT savings that can be realized from both the church's perspective and the employee's. The most common reason churches and pastors don't take full advantage is that they often don't fully understand its impact and benefit. Imagine cutting your costs for all pastors by nearly 8% each pay period while restructuring their compensation to pay in less taxes than they are currently? What could you do with those newly released resources? 

Consider scheduling a consult with a well-informed CPA or tax professional that currently works on the behalf of pastors to talk you through your options for those on your staff who are pastors or ministers. Want to real investment in the financial future of your pastoral staff? Consider inviting that CPA back into a staff meeting for your ministerial/pastor staff to talk through how it could impact them. They could then take it back to their personal CPAs with more informed thoughts, questions, and ideas to take next steps that could greatly impact what they take home each and every month. It literally could be a win-win for the pastors and for the church.

Don't know a well-informed CPA or tax professional experienced and competent in the area of ministerial taxation? Shoot us an email and we'll be glad to connect you with someone we trust.

Consider outsourcing activities that are a fit for remote work.

We realize by being an outsourced partner for churches that this could come across as a self-serving, shameless plug. We're ok with that. We're ok with it because not only do we see significant cost savings for our church partners in our services compared to in-house employees, we see numerous churches getting acquainted with all types of different remote-based services that are available to them that give them as good (and oftentimes better) results when compared to in-house, traditional part-time and full-time employees. Here are some of the most common contract services we see for churches that are worth considering in your 2022 budget:

• Administrative support
• Marketing projects/initiatives
• Graphic design
• Video production and video editing
• Social media management
• HR support and guidance
• Legal counsel
• Payroll processing
• General bookkeeping
• Capital campaigns
• IT structures, oversight, and troubleshooting

If you currently have people in these positions, we're not suggesting you terminate them just to free these resources; however, as people transition or you consider bringing on staff to address specific needs, these areas above are a great consideration to eliminate unnecessary costs and to bring in experts in their field. In years past, you wouldn't have access to experts across the country like you do today because of technology. And because of these newly available resources, you can have access to best-practices only given to those who can work with multiple churches to see different perspectives, approaches, and outcomes. No, it's not for all positions, but those that it is for, it can be revolutionary to not only your finances, but your ability to realize your vision.

I hope you find this list of tactics useful in your upcoming budgeting process. As always, if you have any specific question, please feel to reach out to me via email at [email protected].