Does your board have a quick and easy way to assess your non-profit’s financial performance? It does if it has a dashboard with carefully chosen and up-to-date key performance indicators (KPIs). Dashboards also can be set up to provide critical information to multiple audiences regarding specific goals and fundraising campaigns. Here’s how you can get started.
Your Non-Profit’s ‘Business’ Drivers
To facilitate informed, timely decisions, you must first select the right KPIs. For a financial dashboard, these will depend largely on factors such as your organization’s revenue streams, key expense factors, budget, and strategic goals. To include the most useful metrics, identify your non-profit’s ‘business’ drivers.
In addition, determine which factors affect the reliability of your revenue streams — and which influence expense levels. Then, create KPIs that monitor those factors. Think, too, about the level at which you want to track your KPIs. You could monitor them by individual program or function, or at the organizational level.
Staging Financial Stability
Say that a non-profit theater company’s board is concerned about financial stability and liquidity. The theater’s primary business drivers are proper pricing and maximum attendance. Its dashboard might include such KPIs as:
- Operating results
- The level of liquid unrestricted net assets
- Current debt ratio (total liabilities / total assets)
- Progress toward a desired number of months’ cash on hand (cash on hand + current unrestricted investments / average monthly expenses)
- Number of tickets sold
- Average revenue per performance
Over time, this non-profit likely would need to adjust its KPIs as its strategies, priorities, or programs change. What was ‘key’ last year isn’t necessarily key in today’s challenging environment.
Other Important Metrics
Certain KPIs are popular among a variety of non-profits, including:
Current ratio: This reflects your organization’s ability to satisfy debts coming due within the year. Divide current assets by current liabilities. A ratio of “1” or more generally means you can meet those obligations.
Projected year-end cash: Based on the current cash position plus budgeted cash flows through the end of the fiscal year, this projects liquidity and ability to satisfy upcoming commitments.
Year-to-date revenue and expense: This measures actual results against a budget and reveals whether revenues and expenses are in line with expectations or within a reasonable range.
Program efficiency ratio: The ratio assesses mission efficiency by showing how much funding goes to programs vs. administrative or other expenses. Calculate it by dividing program expenses by overall expenses.
Once you successfully establish a financial dashboard, you may want to use the tool for other purposes. Some non-profits create dashboards to monitor hiring stats, board ‘accountability,’ risk management, and social media use. Contact us for more information.