Nonprofit Resources

Comparing Your Church’s Performance

Is your church using its financial resources as efficiently as possible? How do your church’s current financial results compare against previous results? How do your results compare with similar churches? 

Comparing your church’s financial results can help you spot issues as well as strengths and plan strategically.

Approaches to Comparison

There are two ways to compare your church’s financial health. The first is to compare data from prior years to the current year. This inward comparison can highlight historical trends that may indicate underlying changes within your church.

The other way is to compare your church with similar-sized churches or peer churches.

Determining the Makeup of Peers

When selecting peer churches to compare against, keep in mind that benchmarking against churches with similar asset sizes can be very misleading. Churches with older properties tend to have smaller property and equipment values due to depreciation. Instead, find a peer group of churches with similar numbers of average adult weekend attendees for comparison.

Subscribers to the CapinCrouse Church Financial Health Index, a real-time database of specific ratios, have access to data from hundreds of churches. The Index calculates peer averages and provides the midpoint, minimum, and maximum of peers in the range. It also gives recommended benchmarks. Alternatively, you can use data such as compensation studies, or you may be able to obtain valuable ratio and peer information from your accountant or auditor. Regardless of where you obtain peer information, understanding how your church is performing in relation to peers may help you identify areas to improve.

What to Compare

Ratios can be a key indicator of how well a church is functioning in comparison to its peers. The financial ratios that make up the Index will help you answer this question, assess the financial wellness of your church, and identify areas for improvement.

The ratios provide the most accurate information when they are calculated from financial statements and underlying accounting records that are in accordance with U.S. generally accepted accounting principles (GAAP). The key to any performance measurement is to find what works best for your church and is the most helpful in supporting your ministry.

Demographics of Your Peer Group

To make effective comparisons, it’s also key to understand the demographics of the peer churches you’re comparing against.

Consider how many other participants make up the ratio averages your church is using as a benchmark. An average ratio calculated with only a few participants may produce a much different result than one calculated with many.

It is also important to benchmark your church against others that are similar in size and in a similar region of the country. For example, property and equipment per full-time equivalent (FTE) employee may be significantly different for churches in the Midwest than churches on the West Coast because of higher property costs in the West. Index subscribers receive a demographics report showing the composition of peer churches included in the averages.

Inward Comparison

The trends noted when comparing results with prior years will help your management and board make certain decisions.

A year-to-year comparison will be helpful in:

• Preparing the budget for the upcoming year, because it will give a more realistic cash flow forecast.
• Providing a realistic view of actual giving. If your church is growing, you may find a consistent pattern of increased giving. If there is a continual decline in giving, wishful budgeting will not create funds. The comparison may also note anomalies.
• Viewing funds received and spent over a set period. This will enable you to align your church’s spending patterns with your mission and vision.

Organizations outside your church may require certain inward comparisons as well. Capital campaign consultants, for example, would be very interested in attendance and giving data. Lenders may also have reporting requirements related to debt covenants or may request some of these types of information before extending credit to your church.

Benefits of Beyond the Average of the Range

If you compare your information with peers, it may be helpful to calculate both the average and the midpoint to reveal the spread of results in the range. Why? Because you don’t know how far apart the results are that make up the averages.

The midpoint provides validation of the average. If the average and midpoint are far apart, the underlying results are spread out and being close to the average is less important.

If the average and midpoint are close together, being close to the average is more desirable because most of the ratio results in the range are close together. It also indicates that the churches at the high and low points of the range are not typical of the churches participating in the range.

You can see how important this information is for a church that represents the maximum in the range of salaries and is almost at the maximum in the range of benefits. Comparing the salaries and benefits of church personnel to the same information from peer churches would provide a church with information critical to making future salary decisions.

Benefits of Providing the Minimum and Maximum in the Range

Keep in mind that knowing the minimum and maximum amounts for your peer group will also help you analyze your data against peers. Knowing this lets you know how close you are to the top or bottom of the range. This can be very beneficial when comparing certain ratios such as the average salary per full-time equivalent (FTE) employee.

If you have any questions about the Church Financial Health Index or are interested in a subscription, please contact us to learn more.

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