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The goal of many nonprofit organizations is to improve the quality of life by providing help or resources to a specific group. Certain nonprofit-specific key performance indicators (KPIs) can help nonprofits focus on their goals. KPIs allow organizations to make informed decisions and measure the outcomes of those decisions.
A key performance indicator (KPI) is a metric that measures the success of an organization. It is a numerical value compared with other data points to determine progress towards achieving specific goals. There are several KPIs to measure different aspects of a nonprofit organization.
Although nonprofits do not make a profit for owners or shareholders, they still have financial obligations that need to be considered. Examining financial KPIs ensures that the nonprofit is on the right track with its finances. The financial KPIs include:
Fundraising ROI = (Total revenue – total expenses) / total expenses
This metric evaluates the expenses incurred organizing a fundraiser against the revenue raised from that fundraiser. A negative fundraising ROI implies a loss, while a positive value implies a gain.
Most nonprofits have limited staff and resources; therefore, the fundraising ROI can help an organization understand if its fundraising budget and resources are being used efficiently to obtain contributions and other support.
Program efficiency ratio = program expenses / total expenses
The program efficiency ratio examines how well the organization is achieving its mission. The indicator is calculated by dividing the program expenses by the total expenses. A higher ratio means the nonprofit can comfortably cater to its program expenses. Typically, a healthy nonprofit has a program efficiency ratio of 75% or higher; however, this can vary based on the type of nonprofit. This ratio is important to many current and potential donors as it indicates how much of the organization’s resources are being used to directly support its mission.
Liquidity = Current assets – current liabilities
Liquidity is the ability of the organization to get cash whenever needed. It is also called working capital or operating reserve. This KPI assesses the amount of money available in the organization. When evaluating liquidity, it is crucial to consider the cash conversion cycle. Low or negative liquidity may indicate the organization does not have sufficient assets to cover its upcoming financial obligations. It is typically recommended to maintain an operating reserve to cover at least 25% of the annual operating budget.
Gift secured refers to the number of gifts your nonprofit received over time. The standard time for evaluating gifts secured is annual; however, an organization can also evaluate monthly, quarterly, etc. You can analyze this KPI more effectively by segmenting your donors. To calculate, add the total amount of gifts received in a specified period.
Nonprofit organizations rely on donors to raise revenue. Therefore, these organizations require aggressive marketing strategies to attract donations. Marketing KPIs help track the success of these strategies.
Donor growth rate = [(number of donors this year – number of donors last year) / donors last year] x 100
The donor growth rate measures the changes in acquired or lost donors over a specified period. This metric is also important in conjunction with the donor retention rate, which measures the number of repeat donors from the previous year. A low rate may limit your organization’s ability to grow its fundraising efforts.
Social media engagement rate = (number of engagements / total number of impressions) X 100
The social media engagement rate examines how well users engage with the organization on social media platforms. User engagement plays a vital role in the effectiveness of marketing strategies. Social media engagements involve user interactions, including shares, likes, link clicks, or comments.
An engagement rate of between 1% and 2% is satisfactory for most organizations. Using previous engagement rates as a benchmark can help your organization improve its effectiveness. Comparing the rates with other peers in the industry can also help evaluate efficiency.
Email open and click-through rates track the success of email marketing. Email open rates show the ratio of people who opened the emails to the total number of people who received emails. The average email open rate for nonprofits is 21.33%.
The email click-through rate measures the number of people who have taken action on your email. The rate is calculated by dividing the number of people who clicked at least a link in the email by the total number who received it. A high click-through rate shows that the email marketing strategies are effective.
Community outreach KPIs measure the effectiveness of your reach in the community.
Beneficiary growth refers to the changes in the number of beneficiaries over time. Organizations can track this annually, quarterly, or monthly. This metric can help your nonprofit make operational decisions, determine how many people to hire, and budget for the upcoming years.
Organizations should survey how satisfied the community is with their services to indicate if their programs are effective. Beneficiary satisfaction rates can help nonprofits decide which programs to prioritize and which to get rid of.
Each fundraising event requires different amounts of resources. Evaluate each program to determine the total cost it takes to put on the event vs. the amount of revenue it brings in. This measurement will help you identify which programs to eliminate or focus on to improve donor growth and retention.
Donors can often dictate how they want their contributions to be utilized. Measuring this can help you understand how much you have in “free” funds vs. cash with restricted use. This KPI can tell you what percentage of your contributions are designated by donors for a specific use.
The cash flow KPI calculates how much your organization is spending vs. receiving at a given time. It will give you insight into the condition of your organization and whether you can continue to meet your financial obligations.
Are you having challenges analyzing your nonprofit's key performance indicators? Lutz is here to assist you. Contact us if you have any questions or want to learn more about our nonprofit or data analytics services.