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Key performance indicators for NFP accountants

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Key performance indicators for accountants working in the NFP space are valuable for measuring performance outcomes and gaining beneficial financial insights into the performance and sustainability of the organisation.

Accountants working in not for profit organisations usually juggle competing priorities within tight budgets. Measuring KPIs provides information and data essential for sound financial decision-making, helping you to tell a story to the Board and management that is broader or more nuanced than the raw numbers alone can tell.

Financial KPIs to consider for your NFP

In any organisation different departments rely on different sets of KPIs to measure their performance and finetune their strategies. There is no one-size-fits-all set of KPIs – you need to select performance indicators that are meaningful to your organisation, relevant for the size and maturity of the entity and that help to shine a light on the areas that are most important to your growth/survival at this point in time.

Balance sheet metrics
Current Ratio: illustrates your short-term liquidity and is the ratio of the organisation’s current assets to its current liabilities. Current assets are those that can be converted into cash within a year, including cash, accounts receivable and inventory. Current liabilities include all liabilities due within a year, including accounts payable, leave entitlements, (some) grants in advance. Generally, a current ratio below one may be a warning sign that the organisation doesn’t have enough convertible assets to meet its short-term liabilities. The current ratio formula is: Current Assets / Current Liabilities, and the number generated is the value of current assets to each $1 of current liabilities.

Working Capital: like the current ratio, it compares the organisation’s current assets with its current liabilities but the result is expressed in dollars rather than a ratio. Low working capital may indicate that the organisation will have difficulty meeting its financial obligations. Conversely, a very high amount may be a sign that it’s not using its assets optimally. The formula for working capital is: Current Assets – Current Liabilities, and the resulting dollar value can be considered your ‘available’ cash over which you have discretion to spend.

Reserves to Expenditure is one of our other favourites, expressing the proportion of the annual operating budget that is covered by your accumulated reserves or retained earnings. The formula is Reserves / budgeted annual expenditure.

Expense Cover is another similar metric that highlights your cash runway. The formula is Reserves / (budgeted annual expenditure / 52), the number generated is the number of weeks that your reserves would cover if no further funding was received.

Reserves benchmark: similar to expense cover, some organisations find it helpful to set a reserves benchmark, which is the minimum level of reserves that the Board is comfortable with. You can express this target either as a dollar value or as a number of week or months.

P&L metrics
Budget Variance: this compares the organisation’s actual performance to budgets or forecasts. Budget variance can analyse any level of detail within a budget – from the bottom line result through to individual income or expense line items. The variance can be stated in dollars or as a percentage of the budgeted amount. A positive budget variance value is considered favourable for revenue and income accounts, but it can be unfavourable for expenses – it depends on whether you are trying to reduce costs or you have funding that must be exp[ended by a deadline. The formula for calculating budget variance is: Actual result – Budgeted result to generate a $ variance or (Actual result – Budgeted result) / Budgeted amount x 100 to generate a % variance.

Revenue Source – many NFPs are actively trying to diversify their income streams to ensure long term sustainability. A revenue source metric could simply show the actuals as a percentage or dollar value of the various revenue streams you have, or you could measure against targets set in conjunction with your annual budget.

Expense/Cost of Sales/Gross Margin – some NFP’s may earn their revenue through fee for service so understanding the main cost driver and gross margin is important; am I making enough after direct costs to cover my overheads? Setting a target gross margin as a KPI can assist in ensuring this is met.

Fundraising metrics
Donor acquisition – Donors are essential to securing sufficient revenue for some organisations to meet their operating budget, requiring a robust and successful outreach strategy that builds and nurtures relationships with donors.  As donors directly impact revenue, measuring the performance of the donor acquisition strategy, including acquisition cost v return, provides critical information to help your team inform their strategy, entice larger contributions and improve the volume and quality of the donor pool.

Donor Retention: Assessing the rate at which donors continue to support the organisation over time is a key indicator of donor satisfaction and long-term sustainability. High donor retention is more cost-effective than constantly acquiring new donors.

Fundraising efficiency –  ensures transparency and accountability and that resource allocation is working at its optimal level. By tracking the cost of fundraising relative to revenue generated, non-profits can assess their ability to convert donations into impactful programs.  Regular monitoring helps identify underperforming strategies, allowing the organisation to adapt and improve its fundraising efforts. Donors and stakeholders often scrutinise these metrics, influencing their trust and willingness to support the organisation. Measuring and reporting fundraising efficiency establishes a sustainability and credibility profile that can be shared across the organisation and its stakeholders.

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Non-financial KPIs that help push the organisation forward

Most leaders, employees, and stakeholders working for and with NFPs are strongly focussed on the organisation’s mission so creating KPIs for measuring non-financial activity is a powerful set of tools for NFP to generate engagement and enhance awareness.

Program outcomes – can cover a broad range, from what you do – number of participants, number of services delivered, to how well you did it – measured through client satisfaction, attendance rates, , improvements in well-being, or changes in behaviour, provide impactful feedback to continuously improve your work as well as excellent storytelling content. 

People metrics – staff and volunteers – tracking recruitment, retention, and satisfaction correlates with a well-functioning not for profit organisation. Staff and volunteer engagement and satisfaction has a strong impact on program effectiveness and client satisfaction. .

Social media engagement – Monitoring social media metrics including likes, shares, comments, and followers, provides instant feedback on the organisations ability to reach and engage with its audience.

Client satisfaction: Garnishing feedback from the beneficiaries helps assess whether their needs are being met effectively and can guide program improvements. Client surveys provide a plethora of valuable and actionable feedback that builds into KPI strategies across the whole organisation.



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KPIs create a culture of continuous improvement

KPIs help foster a culture of continuous improvement that is instrumental for growth and adaptability. Regular feedback and performance evaluations supported by KPI reporting enable the NFP to celebrate the wins and identify challenges the organisation as a whole can buy into.  

The measurement and reporting of outcomes provide excellent storytelling content to motivate and inspire the NFP to continually strive and make a difference. A culture of continuous improvement leads to more innovative, agile, and empowered individuals capable of adapting to changing circumstances and driving organisational success in the long term.

You can find further resources for other fundamental areas of NFP accounting below:

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