By Doug Crozier
It was late August 1972 when I walked into one of my first college classes at the University of Nebraska in Lincoln. Accounting 101 was in a lecture hall large enough to hold more than 700 students. I learned a lot from Accounting 101 during that first semester, even though the large lecture hall was intimidating to this small-town kid. One of the key fundamentals of financial accounting I learned is a simple rule: Total Assets minus Total Liabilities equals New Worth (or New Assets in the not-for-profit world).
In the mid-1990s, when I went work in the parachurch world, I would ask myself, What is the meaning of finances in the local church? How does a church operate from a balance sheet perspective? Many churches today never produce a balance sheet. The more important document is the Statement of Activities (or Income and Expense Statement in the for-profit world). Most church leaders are interested in ensuring the church is covering its expenses with tithes and offerings. But the financial future of our churches rests on the balance sheet. So, let’s dissect the question, “What is the future of finances in the Restoration Movement?”
Managing Our Financial Assets and Liabilities
This is how Investopedia defines finance: “Finance describes the management, creation and study of money, banking, credit, investments, assets and liabilities that make up financial systems, as well as the study of those financial instruments. Some people prefer to divide finance into three distinct categories: public finance, corporate finance and personal finance.”
The church falls into the corporate finance category.
Let’s begin by looking at the two key components of the balance sheet: assets and liabilities. Assets, from a church perspective, are mainly cash and real estate. On the liability side is mainly debt: a mortgage, line of credit, bonds payable, and others. Of course, cash from tithes and offerings is very important to running a church. Real estate owned includes land and buildings, things that are very beneficial to the church as it operates and serves its people.
In the last 23 years, I have participated in approximately 1,000 Restoration Movement church building projects. I think that building is very important to church growth, and that it generates attendance, which in turn generates tithes and offerings—cash—to run the church and build ministry. I have seen churches double, triple, and even quadruple in size when they leave a rented facility and move into a building they own. And that has occurred over a very short time frame. So, the building is a very valuable asset!
And among the most valuable assets within our churches are key volunteers who have exceptional experience in finances. People with financial, accounting, banking, and business experience can help leadership make critical decisions as the church grows. A key development over the last 25 years has been the addition of the executive pastor. This position has allowed the senior pastor to delegate key processes within the day-to-day management of the church.
Developing Our Goodwill
As I progressed in my Accounting 101 class, I also learned about the intangible asset category of goodwill. Investopedia defines goodwill as “an intangible asset that arises as a result of the acquisition of one company by another for a premium value. The value of a company’s brand name, solid customer base, good customer relations, good employee relations and any patents or proprietary technology represent goodwill. Goodwill is considered an intangible asset because it is not a physical asset like buildings or equipment.”
Why is goodwill so important to the success of the church?
Even though a church does not carry it on its financial statement, and none of these categories assign it “financial value,” I think goodwill is by far the most important asset of a church. Let’s break down the key components of Investopedia’s definition:
1. Brand name. Our churches have developed excellent brand name and recognition while keeping the churches’ mission in the forefront.
2. Solid customer base. “Be diligent to know the state of your flocks, and attend to your herds” (Proverbs 27:23, New King James Version). Our churches must keep a solid membership and attendance base. Through contemporary worship services, dynamic preaching, small groups during the week, and great children’s and youth programs, we are on the cutting edge of ministry today!
3. Good customer relations. “In their hearts humans plan their course, but the Lord establishes their steps” (Proverbs 16:9). Helping members and attendees feel connected with one another and the church’s mission is paramount to your success. Being honest and open is a key to solid relations between leadership and the congregation.
4. Good employee relations. Many pastors know the importance of a great staff and their relationship with the congregation. I know because they have told me. A priority for church leadership should be to take care of the church staff.
5. Patents or proprietary technology. Some of the most creative technology is produced through the church. I am constantly amazed by technological developments in the church world. Even more amazing, however, is the creativity on display in sermon series, worship service coordination, and many other ministry activities.
These five intangible assets are of major value to the church and are essential in its success. They may be meaningless in the finance world, yet I believe goodwill is the cornerstone to a church’s mission.
Discipling Ourselves to Get Financially Healthy
Many people consider the Restoration Movement Christian church to be the fastest-growing evangelical movement in America. I have been a witness to this over the last 23 years. In 1995, approximately 50 of our churches had an average weekly worship attendance of more than 1,000. Today the number probably exceeds 200 churches.
Along with this incredible numerical growth, many churches in our movement have followed simple financial principles to ensure their financial health and future. I call this the “getting healthy” phase of a church’s life when they are experiencing major growth in facilities, people, and programming. Over the years, I have seen seven simple principles through which disciplined churches have created a solid financial condition.
1. Build a reserve fund even when you do not think you can do it. “The wise store up choice food and olive oil, but fools gulp theirs down” (Proverbs 21:20). This is a basic principle for personal finances and, I believe, for the church. A church needs to maintain three to six months of cash reserves. I have seen many instances of churches facing an unexpected emergency, yet they do not have this simple principle in place. They are unprepared when an air conditioner dies, the church building floods, or a major snowstorm hits. Online giving has enabled churches to be better prepared for emergencies, which is good, because the next major expense seems always to be just around the corner.
2. Pay down and (ultimately) pay off your mortgage. “For which of you, desiring to build a tower, does not first sit down and count the cost, whether he has enough to complete it?” (Luke 14:28, English Standard Version). Do whatever you can to reduce your debt. Pay down your mortgage. That’s unlikely advice from a banker by trade (which I am). But you must reduce your mortgage before you can enter the next phase of expansion. The faster the church becomes debt-free, the more ministry it can accomplish . . . and more quickly. The future of our movement depends on healthy churches investing in new churches.
3. Prioritize missions. “Therefore go and make disciples of all nations, baptizing them in the name of the Father and of the Son and of the Holy Spirit,and teaching them to obey everything I have commanded you. And surely I am with you always, to the very end of the age” (Matthew 28:19, 20). Missions must be a priority, whether the church is growing or declining. Giving to missions is a simple financial calculation based on solid biblical principles. Make sure it is a priority in the church.
4. Invest in your staff. Developing a good staff will translate into building a solid church. Unhappy and disgruntled staff leads to major problems.
5. Build an online giving program. This key financial tool has revolutionized people’s ability to tithe and give. It makes the process of giving easier and more efficient. For example, I set my tithe amount, and my church pulls it from my checking account on the fifth of every month. Even if a major snowstorm hits Denver, where I live, and church services are canceled, my tithe is delivered to the church.
6. Discipline, Discipline, Discipline. “Whoever loves discipline loves knowledge, but he who hates reproof is stupid” (Proverbs 12:1, New American Standard Bible); “Apply your heart to discipline and your ears to words of knowledge” (Proverbs 23:12, NASB). Financial discipline is necessary to ensure future growth and expansion of ministry. Ministry slips whenever leaders cut corners, forget to track key indicators, and allow complacency. Due discipline is paramount in all areas of financial management and ministry.
7. Continue to dream. “A wise man thinks ahead; a fool doesn’t and even brags about it!” (Proverbs 13:16, The Living Bible). The church needs to set goals and dream of what to do next. Being creative, dreaming big, and being open to change will allow ministry to grow and prosper.
Making the Most of Every Opportunity
With the downturn in the economy in the latter part of the last decade (2007–09), I saw a tremendous opportunity for churches to buy vacant big-box retail and light industrial buildings at very steep discounts. This trend has continued, even with the economic recovery, mainly because people are buying online instead of going to the mall or retail locations. This trend will continue and our movement needs to be prepared to continue to take advantage of it.
One of the ways to accomplish this is for our church extension funds to use their balance sheets to help churches acquire these big boxes at steeply discounted prices. In addition, churches need to use the negotiating skills of key people within our funds who have experience in acquiring real estate assets. Cash talks in these situations! The ability to purchase the big box and build it out costs half as much and can be accomplished in a much shorter period than a ground-up construction project. Many of these former grocery stores, Walmarts, Home Depots, and others are now locations where people are being won to Christ! I love the big-box concept.
So, what is the future in expanding our financial assets to move the church forward? It rests on our ability to develop young leaders to plant new churches and partner with our church extension funds to expand ministry. New tools and concepts will emerge, but without leadership development and capital expansion, we will not be able to reach the millions of people we need to for Christ.
Over the years, I have watched other denominational church extension funds struggle, mainly due to the crumbling of denominations. Yet, our three church extension funds—Christian Development Fund, Christian Financial Resources, and The Solomon Foundation—continue to prosper as we serve Restoration Movement Christian churches and churches of Christ. This is a real testament to our movement and the leadership of all three funds.
The main driver to growing our churches is the ability to produce exceptional preachers and leaders. I am a strong believer that our best days as a movement are still to come. Our movement has an exceptional future as long as we manage our financial assets and liabilities, develop our “goodwill,” discipline ourselves to “getting healthy,” and follow the Great Commission.
And by the way, I did pass Accounting 101!
Doug Crozier serves as chief executive officer of The Solomon Foundation.