A Financial Dashboard Can Take Your Nonprofit Where It Wants to Go
September 29, 2022

Does your board have a quick and easy way to assess your nonprofit’s financial performance? It does if it has a dashboard with carefully chosen and up-to-date key performance indicators (KPIs). Dashboards can also be set up to provide critical information to multiple audiences regarding specific goals and fundraising campaigns. Here’s how you can get started.

Your Nonprofit’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 nonprofit’s “business” drivers.

Additionally, 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 nonprofit 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, and
  • Average revenue per performance.

Over time, this nonprofit 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 nonprofits, 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.

Multiple Uses

Once you successfully establish a financial dashboard, you may want to use the tool for other purposes. Some nonprofits create dashboards to monitor hiring stats, board “accountability,” risk management and social media use. Contact us for more information.

© 2022

 

You might also like

The Audit Is Over. Now What?

The Audit Is Over. Now What?

Whew! That’s probably your reaction when outside experts announce that their audit of your nonprofit is complete. But even if auditors have left your premises and returned the documents they’ve reviewed, the work isn’t really over. Not only do your executive director...

read more
The FLSA Asks Your Nonprofit to Accurately Classify Staffers

The FLSA Asks Your Nonprofit to Accurately Classify Staffers

Are your nonprofit’s staffers employees or independent contractors? It’s an important question because under the Fair Labor Standards Act (FLSA), misclassifying workers can lead to penalties and other costs. If you haven’t reviewed your staffers’ status since the...

read more
Lost Your Tax-Exempt Status? Here’s How to Regain It

Lost Your Tax-Exempt Status? Here’s How to Regain It

So you forgot to file your nonprofit’s Form 990, 990-EZ or 990-N with the IRS. It can happen — particularly with newer organizations that are still trying to get a handle on all the financial and regulatory requirements of running a nonprofit. However, if you forget...

read more