Data – that’s the difference between a guess and an informed decision. As a non-profit, the sustainability of your organization relies heavily on your ability to evaluate its financial health and overall success. Here are three of our firm’s favorite Key Performance Indicators (KPIs) for non-profits:
1. Net Income/Net Surplus:
Net Income, also known as Net Surplus, Excess of Revenue over Expenditures or the Change in Net Assets, is a crucial financial KPI that indicates the overall financial performance of a nonprofit. It represents the difference between total revenue and total expenditures during a specific period. A positive net income indicates that the organization's revenue exceeds its expenditures, resulting in a surplus. Conversely, a negative net income indicates a deficit, where expenses exceed revenue. Monitoring net income helps nonprofits assess their financial sustainability, profitability, and ability to cover operational costs, invest in programs, and build reserves.
2. Program Expense Ratio:
The Program Expense Ratio measures the percentage of total expenses allocated to program activities compared to other expenses, such as administrative and fundraising costs. It reflects the organization's commitment to fulfilling its mission and delivering its programs and services effectively. A higher program expense ratio suggests that a larger portion of the nonprofit's resources are dedicated to program delivery, indicating a greater impact and alignment with the organization's mission. Donors and stakeholders often look at this ratio to evaluate the efficiency and effectiveness of a nonprofit's operations.
3. Fundraising Efficiency:
Fundraising Efficiency is a KPI that measures the effectiveness of a nonprofit's fundraising efforts. It compares the costs incurred in fundraising activities to the amount of funds raised. This ratio helps evaluate the efficiency of the nonprofit's fundraising strategies, campaigns, and activities. A lower fundraising efficiency ratio indicates that a higher percentage of funds raised go directly toward supporting the organization's programs and services, rather than being spent on fundraising expenses. Monitoring fundraising efficiency helps nonprofits assess the effectiveness of their fundraising efforts and make informed decisions regarding resource allocation and fundraising strategies.
While these financial KPIs are essential for monitoring the financial performance of nonprofits, it's important to note that they should be considered alongside other KPIs related to impact, outcomes, and donor engagement to gain a comprehensive understanding of the organization's overall health and effectiveness.