This article highlights the importance of KPIs for Not-for-Profit organisations. Key Performance Indicators (KPIs) are important for any organisation and arguably more so for Not-for-Profit organisations. The main reason for this is that most Not-for-Profits act on behalf of the public and rely on funds received from the public. This is usually in the form of, for example, donations, subscriptions and membership fees. In addition, there can be grants from government organisations and distributions from philanthropic organisations. In essence, they are working with other people’s money.
Whether you are a small sporting club or an international aid charity, KPIs are critical for measuring performance, compliance and achievement against targets.
KPIs to Track Strategic Goals
In addition, a good set of KPIs can be used for accountability purposes. They show that the organisation has operated in an honest, ethical and trustworthy way. This can also strengthen and enhance the public perception and reputation. All of this is vital for Not-For-Profit groups.
Calxa has 17 standard accounting ratios that as a default set of KPIs for you to use. In addition to those accounting KPIs, there are other KPIs that you should be using. It is important to measure other organisational performance objectives.
Goals such as those derived from a Mission and Vision Statement which clearly articulates the goals of the organisation can be invaluable. This allows the organisation to work towards achieving common goals. Here are some standard Financial KPIs for Not-for-Profit that show ratios for Admin to Revenue, Return on Assets and Wages to Turnover.
The Role of KPIs for Not-for-Profits
The following points highlight the role and importance of KPIs in achieving these goals.
The Strategic Plan is used to link the organisational goals by prioritising the main objectives and how they will be achieved. The KPIs measure the achievement of the objectives.
The Governance Framework is the set of policies and procedures that provide a framework for the organisation to operate. The Board, Chief Executive Officer and other key staff often assume they are in compliance with their policies because that’s what a report tells them. That’s not good enough. Well written KPIs for Not-for-Profits can be used with each policy to prove that compliance has occurred.
Organisations face many legal obligations that include taxation laws, accounting and audit standards, OH&S laws and ASIC reporting requirements. KPIs can be used to establish that legal obligations have been met.
Most organisations rely on donations, grants and other funds received from the public. Not-for-Profit KPIs can be used to show funds have been used as intended, acquittals have been prepared and aims of the funding have been achieved. For example, this Program Wages to Income shows an overspend compared to the allocated funding budget.
Adding Value with KPIs
One final point with KPIs is that they should be written in a way that is clear, relevant and add value to the organisation. Furthermore, assessment of performance against your Not-for-Profit KPIs set important performance benchmarks. These can be used for future planning and establish key strategic objectives.
If you are looking for more ideas, check out this blog 20 KPIs for your Nonprofit to Track. To learn more about how to use and create financial KPIs in Calxa, have a look at this webinar recording KPI Tips, Tricks and Metrics.