Webinar
April 21, 2023
|Nonprofit leaders require accurate, relevant data to measure progress, gauge financial performance, and make informed decisions. That’s why tracking financial metrics and key performance indicators (KPIs) is critical to gaining insights that help maximize your organization’s mission. Read on to learn 14 important nonprofit metrics, how to calculate them, and why they are vital to your organization.
There are hundreds of financial ratios, metrics, and KPIs you can track. The key is finding the ones most relevant to your organization’s goals.
Here are some steps to get you started:
The first step is returning to your organization’s mission and identifying its primary goals. That way, you can identify specific points of focus and determine what metrics are most helpful in measuring progress in those areas.
Next, identify strategic objectives and determine which KPIs best measure progress toward their achievement. For example, if an objective is to raise money for a specific program, a useful KPI could be the donor growth rate.
Donors, board members, and other stakeholders typically have different focus areas within the organization. Therefore, include KPIs in your financial reporting that are best aligned with their interests and organizational responsibilities.
Since there are hundreds of KPIs to choose from, narrow down and prioritize your list based on their relevance to your organization's goals and objectives.
Consistency is often more important than frequency when measuring KPIs. Create a plan for measuring metrics and maintain that schedule in order to accurately derive valuable insights over time. Also, remember to revisit your KPIs and adjust your plan as the organization evolves.
Now let’s go over some of the most common metrics used by nonprofits, organized by category:
Since revenue is critical to funding operations, tracking revenue-related metrics is essential to gauge the financial health and stability of the organization.
Some revenue-related metrics to track include:
Total revenue measures income received from all sources, including donations, government grants, membership fees, corporate sponsorships, and merchandise sales.
Revenue by source breaks down income to reveal where the highest sources of revenue come from. This can help the nonprofit allocate promotional resources to the source that provides the most value to the organization.
The revenue growth rate (RGR) tracks the percentage increase or decrease in income over a specific time.
Revenue Growth Rate = ((Revenue in Current Period - Revenue in Previous Period) / (Revenue in Previous Period)) x 100
For example, if revenue was $1000 this month and $800 last month:
RGR = ((1000-800)/800)x100 = 25%
The average gift size (AGS) measures the average amount of money donors give per donation.
Average Gift Size = Total Donations/# Donations
For example, if a nonprofit received $1000 from 10 donors:
AGS = $1000 / 10 = $100
H3: Donor Retention Rate
The Donor Retention Rate (DRR) reveals the percentage of repeat donors over time.
Donor Retention Rate = (Number of Donors in Current Period / Total Number of Donors in Previous Period) x 100%
For example, if a nonprofit has eight donors in this period and ten donors in the previous period:
DRR = (8 / 10) x 100 = 0.8 x 100 = 80%
The Cost-To-Raise-A-Dollar (CRD) or Fundraising Efficiency Ratio metric measures how effectively money is raised by comparing costs with revenue. Calculating this metric for different income sources helps the organization determine the most cost-effective way to raise funds.
Cost to Raise a Dollar = Fundraising Cost ÷ Money Received
For example, if an organization raised $20,000 by holding a concert with a total cost of $10,000:
CRD = $20,000 / $10,000 = $2
The Cost-Per-Donor Acquisition (CPDA) measures how much it costs to acquire a new donor.
CPDA is calculated by summing all the costs of a fundraiser and dividing that figure by the total amount of donors. For example, if an organization held a fundraiser costing $10,000 and received 1000 unique donations:
CPDA = $10000 / 1000 = $10
Tracking expenses is essential to ensure financial stability, demonstrate accountability, and prevent fraud.
Some expense-related metrics to measure in this category include:
The Program Efficiency Ratio (PER) measures the percentage of total expenses directly related to program activities. Higher percentages indicate that the organization is focusing on its mission, while lower percentages reveal that the overhead costs may be excessively high.
PER = Program Expenses / Total Expenses x 100
For example, if an organization is spending $6,000 on programs and $8,000 on overhead in Q1, and $6,000 on programs and $10,000 on overhead in Q2:
PER - Q1 = 6000 / 8000 X 100 = 75%
PER - Q2 = 6000 / 10000 x 100 = 60%
The difference between quarters reveals that overhead spending is increasing compared to program spending, which impacts the organization’s mission.
The Fundraising Expense Ratio (FER) measures how fundraising expenses compare to overall costs. Higher values indicate that more money is being spent to raise funds to support the organization’s mission.
FER = Fundraising Expenses / Total Expenses x 100
For example, if an organization is spending $14,000 on fundraising and $20,000 on total expenses in Q1, and $18,000 on programs and $20,000 on total costs in Q2:
FER - Q1 = 14000 / 20000 X 100 = 70%
FER - Q2 = 18000 / 20000 x 100 = 90%
The difference between quarters reveals that overhead fundraising expenses are increasing, possibly indicating that the organization is spending more on fundraising activities that help fulfill its mission.
The Administrative Expense Ratio (AER) measures the percentage of total expenses directly related to administrative activities. Lower percentages may indicate that the organization’s administrative costs are either under control or too low. Conversely, higher percentages may reveal that the nonprofit is not managing resources efficiently.
Similar to the FER, the AER is calculated by dividing administrative expenses by total expenses.
The Expense-to-Revenue Ratio (ERR) measures the relationship between money flowing in and out of the organization.
ERR = Operating Expenses / Total Revenue x 100
For example, if an organization’s financial statements showed $8,000 in operating expenses and $10,000 in total revenue:
ERR = 8000 / 10000 X 100 = 80%
Measuring liability-related KPIs is important to ensure resources are available to fund programs and maintain long-term financial health.
Some liability-related metrics nonprofits can track include:
The Debt-To-Equity (D/E) ratio measures how much debt a nonprofit has compared to its assets. Measuring this metric over time indicates how well the organization is positioned over the long term with respect to its liabilities.
D/E = (Short-Term Debt = Long-Term Debt + Fixed Payments) / Shareholder's Equity
For example, if the balance sheet shows total debt of $60,000 and total equity worth $120,000:
D/E = 60000 / 120000 = 0.50
This means the nonprofit has 50 cents of debt for every dollar in equity.
The current ratio (CR) measures how well an organization can pay off short-term debts.
CR = Current Assets / Current Liabilities
For example, if a nonprofit’s statement of cash flows shows current assets (such as cash or accounts receivables) of $10,000 and current liabilities (such as credit card debt and accounts payable) of $5,000:
CR = 10000 / 5000 = 2
This means the nonprofit has $2 available for every $1 of short-term debt. A current ratio of 2 or more is a standard benchmark.
The Unrestricted Net Assets (UNA) ratio measures the percentage of unrestricted net assets. This metric reveals the degree of flexibility the organization has regarding resource usage.
The first step is deducting the organization's total liabilities from total assets to determine total net assets. From there, identify any restricted items from net assets and deduct that amount as follows:
Unrestricted Net Assets = Total Net Assets - Restricted Net Assets
For example, if an organization’s Total Net Assets are $10,000, but $5,000 of that is restricted to a specific fund:
UNA = 10000 - 5000 = $5,000
As mentioned previously, there are hundreds of KPIs available to track your nonprofit’s performance.
Some additional metrics you can track include:
Your organization generates a treasure trove of data that can be used to enhance fundraising efforts, optimize operations, and improve services.
enSYNC helps you capture and unlock the power of that information with software solutions customized for nonprofit organizations. Contact us for a free assessment to learn more.
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