When the annual budgeting process rolls around each year, you likely already know your church’s main expenses. Staff salaries, rent, utilities, and ministry supplies may be some of the first items that come to mind.

 

However, you could also incur some invisible costs that might not be as evident to your team. If left undetected and unchecked, these smaller expenses can add up, draining your resources and derailing your financial management strategy.

 

This guide will help you identify potential hidden leaks in your church budget and provide some tips for how to account for these expenses moving forward.

 

 

6 Types of Invisible Costs to Watch Out for

 

 

1. Facility and Building Costs

 

Typical rent and utility expenses aren’t the only building-related costs you might incur. Additional hidden costs might include:

 

  • Deferred maintenance. From a leaky roof to HVAC servicing, your church building may need occasional repairs that significantly increase your yearly expenses.
  • Utility increases. While you’ll allocate funds for utilities, seasonal weather changes may cause utility costs to spike. Additionally, as your building ages, it might become less energy efficient, causing higher costs in this area as well.
  • Janitorial and cleaning supplies. Organizations of all types often underestimate the costs associated with keeping their spaces clean and ready for constituents to use.
  • Security systems or monitoring fees. Installing a security system may be a necessary cost that doesn’t fall neatly into your typical expense categories.

 

 

2. Technology and Media

 

Going digital with different aspects of your church can help streamline your efforts and engage younger generations in your programming. However, technology costs can add up quickly. Remember to account for:

 

  • Streaming costs. For instance, you may pay for a live streaming service so congregants can watch your services remotely.
  • Software subscriptions. Tools like church management systems, fundraising software, video conferencing platforms, and marketing solutions can make operations more efficient, but they also add extra costs.
  • Licensing fees. Whether you’re securing church-specific licensing from Christian Copyright License International (CCLI) or Christian Video Licensing International (CLVI) or regular media licensing, protecting your church from copyright violations can be more costly than expected.
  • Equipment replacement. If a projector, sound system component, or camera breaks, you’ll need enough funds to replace this equipment.

 

 

3. Staffing and Volunteer Support

 

In addition to base salaries, consider other staffing costs, such as:

 

Payroll taxes and benefits. Paying employment taxes and offering church leaders benefits like health insurance, retirement contributions, and paid time off present extra costs for your church.

 

  • Training and conferences. You may invest in staff members’ professional development by purchasing training resources or sponsoring their participation in events like the ARC Conference or the Orange Conference.
  • Volunteer appreciation. While it may not cost much to send volunteers a small gift card, t-shirt, or other gift for their efforts, these expenses can add up to a significant amount depending on the size of your volunteer base and the number of volunteer opportunities you offer each year.
  • Turnover costs. Losing a staff member means investing more time and resources into recruiting, onboarding, and training new staff.

 

 

4. Smaller Program Expenses

 

Although programmatic expenses will likely make up a large portion of your budget, smaller program costs may slip through the cracks:

 

  • Curriculum updates. For instance, you may need to order new books for your children’s ministry to align with your updated curriculum.
  • Hospitality expenses. If you offer coffee before morning services or snacks after night services, you’ll need to account for those costs.
  • Event supplies. You may overlook smaller event costs like signage and decorations.
  • Transportation costs. If you need to rent a van for a mission trip or pay for a bus service, include these expenses within your mission trip budget.

 

 

5. Administration

 

Again, since administrative costs are typically small, you may neglect to budget for them. However, these small expenses can quickly add up:

 

  • Bank and merchant fees. You’ll likely need to pay credit card processing fees on tithes and donations.
  • Postage and printing. While you may use digital channels more, some constituents may prefer engaging through direct mail.
  • Office supplies. Don’t forget to budget for typical office items like paper and pens.
  • Insurance deductibles. Your budget may cover insurance premiums, but it should also include deductibles.

 

 

6. Community Outreach

 

 

Part of leading a church is helping people in need. Remember to factor this community outreach into your budget:

 

  • Benevolence funds. Set aside funds to help community members facing crises.
  • Unplanned outreach opportunities. For instance, if a natural disaster impacts your local community, you may help provide relief.

 

 

How to Account for These Hidden Expenses: 5 Tips

 

Now that you can identify the hidden costs you might fail to include in your budget, leverage these tips to better manage them.

 

  1. Review past spending. YPTC’s nonprofit budgeting guide recommends using historical financial data to better plan for recurring expenses, account for seasonal variations, identify risks, and analyze past surpluses and deficits. Additionally, you can pinpoint categories that you didn’t properly budget for in the past so you can better plan for those expenses in the future.
  2. Develop a contingency fund. You can’t predict every expense you’ll incur due to unforeseen circumstances. Set aside about 5% to 10% of your budget to cover unexpected expenses.
  3. Account for maintenance and depreciation. Remembering that your building and equipment will need repairs over time will help you budget for these expenses. Consider developing a capital reserve that you can access whenever these situations arise.
  4. Anticipate growth-driven costs. The broader your community grows, the more you’ll have to spend on areas like staffing, hospitality, and postage. Adjusting your budget to account for growth allows you to proactively prepare for expanded impact.
  5. Strengthen financial reporting. Don’t be afraid to get specific in your nonprofit financial statements. Break categories into smaller subcategories so you can more precisely allocate funds to these often overlooked areas.

 

Remember to conduct budget-to-actual reporting on a regular basis so you can catch discrepancies between your projected and actual costs and rectify them before they spiral into larger issues.

 

While these tips should help bring awareness to potential hidden costs, every church has its own financial intricacies. For personalized assistance and financial strategy development, consider partnering with a nonprofit controller.