3 KPI Challenges for Nonprofits
Key performance indicators (KPIs) are metrics that just about every nonprofit uses to understand and track their financial health. Like baseball statistics—home runs, stolen bases, runs batted in—they are helpful indicators of how well your organization is performing and where you need to make improvements.
The challenge for many nonprofits is to create the right KPIs, track them efficiently, and make the best use of them to inform strategic decisions. Let’s look at those challenges, and how you can address them.
Are your KPIs clear?
KPIs are only helpful if everyone—including management, the board of directors, and other key stakeholders—understands how they are calculated and what each is measuring. KPIs should be focused and simple, with clear definitions and calculations available to anyone who asks.
For example, to calculate your donor retention KPI, simply divide the number of donors in the current period who made contributions in the prior period by the total number of donors in the prior period. Then multiply by 100. Note, however, that to use this KPI, you’ll need to be able to track donations by donor—which is one reason to use a feature-rich software solution like Sage Intacct.
Are your KPIs timely?
The KPIs that matter today will be out of date in a week or a month. That’s another reason that it helps to use Sage Intacct or other best-in-class cloud-based accounting software solutions. Make sure that your ERP solution will integrate with other systems like Bill.com and Salesforce, so you can automatically calculate and report on your KPIs and view them in easy-to-read dashboards.
Can you drill down into your KPIs?
One common mistake is to view KPIs as the end all and be all, when really they are only indicators. For example, your gross receipts KPI might show a decline over a series of months. That doesn’t necessarily mean the development team is failing. What it does mean is that you need to drill down into your data to find out why the trend is happening and what you can do about it.
Another advantage of a best-in-class financial system like Sage Intacct is that you can drill down to granular details and compare performance across any business driver that you care about. And, because it is cloud-based, anyone with permission can securely access the dashboards from anywhere.
Insero & Co. is a public accounting firm with decades of experience working with nonprofits of all sizes. We can help you with KPI challenges for nonprofits and weigh the benefits of automating your accounting processes and help you make the transition to the latest software solutions. Whatever type of support you’re looking for, we’re here to help you find the right solution.