First, what is a zero-based budget? Simply put, you want to account for every dollar. There should not be any money that is left over after your budget is complete. As Dave Ramsey says, "Give every dollar a name."

There are four steps to creating a zero-based operating budget for your church:

1. Begin with prayer.
2. Determine your projected income.
3. Input your anticipated expenses.
4. Make adjustments where necessary.

Allow me to address each one of these steps separately:

1. Begin with prayer: Although this might sound like I am over-spiritualizing an administrative task, I genuinely believe that the budget process should begin with prayer. You and your team (CFO, Finance Team, Staff, etc.) should begin this process by asking for God's wisdom and God's provision. When the budget process begins with prayer, you can trust that God is guiding you to create a budget that will advance his kingdom.
2. Determine your projected income: Many churches find this task to be difficult. However, it shouldn't be. Allow me to provide you a simple formula that will help. At our church, we look at the last 5 years of income to determine our year-over-year percentage growth. If over the last 5 years, we have seen our income increase by an average of 7% each year, then we use that percentage to determine our projected income for the following year. For example, if we are currently on track to receive $1,000,000 in income, and we have averaged 7% growth for the last 5 years, then our projected income would be $1,070,000 for the following year ($1,000,000 x 1.07 = $1,070,000). Of course, you need to consider other factors as well, such as your local economy, staff transitions, etc. But, the formula I shared above is a great starting point for most churches.
3. Input your anticipated expenses: This is the step that usually takes the most time since it involves everyone on your team submitting budget proposals. At our church, I have a simple Excel spreadsheet that I send to everyone for their budget proposals. Once I receive everyone's proposals back, I input their numbers into our operating budget spreadsheet.
4. Make adjustments where necessary: Since the goal is to create a zero-based budget, you might have to make adjustments to keep your budget in line with your projected income. This can go both ways. It might mean that you have to make cuts, or it might mean that you are able to give increases. Either way, the goal is to account for every dollar.