When we think of nonprofit organizations, many of us first envision local or national charities. But don’t let the name fool you. Despite having “nonprofit” in the title, these organizations are just as centered around money as any for-profit business. The primary difference is what they do with their earnings. Instead of paying out profits to shareholders, they use it to continue their mission, whether it’s an animal rescue group, community arts association, environmental initiative or other worthy cause.
Since nonprofits’ bottom lines are so tied up in their goals and achievements, it’s extremely important for everyone involved (from staffers to board members) to have a firm grasp on what the numbers mean. Here are four tips for promoting financial literacy within nonprofit organizations.
Centralize Data with a Dashboard
Visibility is key to understanding. Since we’re living in an era rife with data visualization tools, why not apply them to a nonprofit by creating a financial hub for interested parties? As the National Council of Nonprofits notes, dashboards are useful for keeping all the “key players” in the nonprofit world informed:
- Boards: Condenses down huge amounts of data into a few actionable statistics and suggestions
- Staff:Helps nonprofit staff members define their roles and know where to focus their efforts moving forward
- Donors: Provides the clarity donors need when deciding whether or not to donate to a given cause or organization
- Grantmakers:Familiarizes grantmakers with nonprofits’ track records and programming
Set Benchmarks for Comparison
The only way a nonprofit organization can gauge its effectiveness is by establishing its mission and key performance indicators (KPIS) to quantify its impact. As management consulting firm McKinsey & Company writes, “Most nonprofit groups track their performance by metrics such as dollars raised, membership growth, number of visitors, people served and overhead costs.”
But organizations truly focused on fulfilling their mission must establish more specific KPIs and benchmarks, or ways to compare their performance to their peers. Only then will they gain insight into what’s working, what isn’t and where exactly to implement productive change.