Key Performance Indicators for Nonprofits
Key Performance Indicators (KPIs) can provide a nonprofit with insight into the organization’s finances. Users can more easily begin to interpret the statements through KPIs to get a better understanding of how the organization is performing financially.
If an organization and its board want to understand if they are meeting their mission, they need to see real-time data. Some common KPIs nonprofit organizations monitor could be:
- Number of clients served
- Number of volunteers or members
- Number of beds (or meals, or classrooms, etc) in a given time period
Whatever it is you’re tracking, the goal is to have the right KPIs to give insight to managers, senior management, and the board to successfully run the organization. And that data needs to be presented in a format that resonates with funders, managers, and the board.
When choosing key performance indicators to track, identify those metrics that align with your organization’s mission and strategic plan. Not only do you need to ensure your efforts (programs or services) meet your goals, but also understand how deviations from these metrics can impact your organization’s financial goals. You want to be sure your efforts meet the following targets:
- Remain financially viable
- Benefit the community or members you are serving
- Contribute to your ability to achieve goals necessary to achieving your overall mission.
Your organization needs to have the right processes in place in order to accurately capture and analyze this data. When you do capture the right information, you can use it to show your board and understand for yourself how to best operate and perform according to what is and isn’t working in your organization.
Visibility into operations includes having a very good understanding of your process. When looking at receivables, it’s important to look at the aging—are they coming when they are supposed to come in? Are the grant dollars coming in every month, on time?
Compare trend lines to actual numbers. Your trend line shows dips and spikes of cash. Can you explain why each spike or dip occurred?
Here are some recommended KPIs for nonprofit financial managers:
- Financial: actual to budget variance
– Consolidated for the organization as a whole.
– For each program and or grant.
- Cash basis summaries (trend graph)
– Cash balances in the bank.
– Cash balances by contract, grant, program, etc.
- Accounts Payable balances
- Accounts Receivable balances