Investors demand transparency. If you’re the leader of an organization that serves the greater good and you aren’t able to provide investors with non profit KPIs, it might be time to rethink your approach.
It’s possible your organization is well established and has a set way of operating that just doesn’t include churning out raw numbers. Or maybe your accounting software isn’t able to quickly generate the non profit KPIs donors demand. No matter what your circumstances are, know this: Modern donors will not donate to an organization without proof it can and will deliver on its promises.
We have a few non profit KPIs your organization should unquestionably monitor, but first, let’s talk about the changing nature of donors.
A Demand for Transparency
Simply put, donors want to know they’re getting a bang for their buck.
According to Fidelity Charitable, 41 percent of donors say they recently changed how they donate because of an increased knowledge of non profit effectiveness. We can attribute this increase in knowledge to the widespread availability of objective assessments of non profit performance on the Internet.
Perhaps even more importantly, 75 percent of respondents were only somewhat hopeful their donation would have a real impact on causes of importance to them. What this tells us is donors are skeptical but also willing to adapt if the information presented to them is compelling.
So, what non profit KPIs should your organization always have at its fingertips? Here are a few suggestions.
1. Liquid Unrestricted Net Assets (LUNA)
There’s possibly no greater indicator of a non profit organization’s future performance than its assets and their liquidity.
Take the Covid-19 pandemic crisis, for example. During financial downturns, funding streams can quickly dry up. Oftentimes non profit organizations simply need to survive through such difficult periods by relying on the assets they have accumulated over time and converting them into cash, if necessary.
Most accounting software systems should be capable of helping your company keep track of its liquid and illiquid assets. Fewer, however, have the ability to keep track of your fixed assets and determine whether any of them can be sold in times of distress.
In any case, you’ll want to have these figures available for potential donors who may be interested in your organization but somewhat concerned about its future viability.
2. Program Efficiency as a Non Profit KPI
If you spend any time online reading reviews of a non profit organization, you’ll find one of the chief complaints is too much of the donor funding going toward overhead. Donors don’t want all of their money going toward executive salaries.
While that’s understandable, you do, of course, need to pay employee salaries and for all of the other costs of running a business. Thankfully, most potential donors will be satisfied if you’re as transparent as possible with them.
To find the program efficiency, all of you need to do is divide the amount of funding allocated toward programming by the total amount spent for all other functions. Although program efficiency is a relatively simple metric to calculate, it will go a long way toward building trust among those who keep the organization going.
3. Gross Receipts Period Over Period as a Non Profit KPI
Like most people, donors are prone to follow the herd. If the market (other donors) deem a non profit worthy of their money, potential donors are more likely to donate, as well.
The gross receipts period over period metric gives donors a sense of how the rate of donations is trending over time. If donations are sharply trending down, they might second guess cutting a check to your organization. Conversely, if donations are trending up, it’s likely a sign your organization is on the right track.
To calculate gross receipts period over period, divide the gross number of receipts in the current fiscal year quarter by the gross number of receipts in the previous quarter. Then, multiply this amount by 100. This will give you the percentage increase or decrease from one quarter to the next.
The ability to quickly and easily conjure all of the non profit KPIs mentioned above starts with having an accounting system fit for the challenges of 21st century non profit organizations. If you’re exploring new options, we have the solution for you.
Contact Timac Business Systems today!