NONPROFIT KEY PERFORMANCE INDICATORS :
Using Financial and Nonfinancial Metrics to Flourish
With the impact of the COVID-19 pandemic and continued economic uncertainty , some nonprofits continue to struggle with financial sustainability . This can mean your board of directors is taking a greater interest in your organization ’ s financial performance . Key performance indicators ( KPIs ) can help focus your board ’ s attention on important metrics .
Identify KPIs Although organizations will see quite a bit of overlap , a nonprofit ’ s KPIs will depend largely on the organization ’ s specific characteristics . That includes its revenue streams , key expense factors , and budget and strategic goals . Put another way , you need to identify your organization ’ s “ business-drivers .”
Determine which factors affect the reliability of your revenue streams — and which factors influence whether your expenses rise or drop . Then create KPIs that monitor those factors . Consider the level at which you want to track selected KPIs . You could monitor them by individual program or function , or at the organizational level .
Over time , you ’ ll likely need to adjust your KPIs as your strategies , priorities or programs change . What ’ s “ key ” today won ’ t necessarily be key in five years . For each KPI , you should develop a target , which may be based on your current budget or part of your strategic plan .
Financial KPIs Seven financial KPIs have emerged as must-haves for nonprofits , including :
1 . Current ratio . This KPI reflects your financial standing , specifically your organization ’ s ability to satisfy debts coming due within the coming year . To calculate it , divide current assets by current liabilities . A ratio of “ 1 ” or more generally means you can meet those obligations .
6 VIEWpoint Issue 2 | 2022