Key Performance Indicators for Not-for-Profit Organizations

Key Performance Indicators (KPI)

KPIs are quantifiable measures of how well you are performing activities that are critical to the success of your organization

• KPIs are the measures of your Critical Success Factors — processes and activities that:
  • Are important to serving your clients/members
  • Manage your program effectiveness
  • Manage organizational health
  • Determine team morale
• KPIs should reflect the organization’s goals
• KPIs must be measurable

Statement of Financial Position Indicators

Liquidity

Current Ratio and Quick Ratio

The current ratio and quick ratio show an organization’s ability to pay obligations. These ratios are useful indicators of cash flow in near future.

Leverage

Debt Ratio

The Debt ratio indicates what proportion of debt an organization has relative to its assets. The measure gives an idea to the leverage of the organization along with the potential risks the company faces in terms of its debt-load.

Solvency Ratio

The Solvency Ratio indicates how capable the organization is of meeting its financial obligations.

Statement of Activity Indicators

Savings Ratio

The savings ratio reveals the rate of the not-for-profit organization’s savings by measuring the relationship between total annual savings and total expenses. Although the savings ratio is an important component of longevity, high ratios may indicate excessive savings.

The savings ratio should be considered in combination with the liquid funds indicator. If the nonprofit has low liquid funds, a higher savings ratio may be desirable.

Grants & Contributions Ratio

The contributions and grants ratio indicates the extent of the organization’s dependence on voluntary support by calculating the percentage of total revenue made up by contributions and grants. It can also be used to calculate other sources of concentrations of revenues.

Operating reliance ratio

This ratio enables managers to gauge whether or not the nonprofit could pay all expenses from program revenues alone.

A good outcome for this measure is one, and in some cases more than one, but most not-for-profit organizations must also rely on grants and contributions to fund operations. 

You can also modify this ratio to review the program revenues and expenses for a particular program or activity within the organization. 

Program efficiency ratio

This information is significant to donors, board members, and managers because it quantifies how much the not-for-profit organization is spending on its primary mission rather than administrative costs.

This answers “How many cents of every dollar spent is dedicated to the not-for-profit organization’s goal, mission or programs?”

Fundraising efficiency ratio

An important takeaway from this ratio is how many dollars the not-for-profit organization collects in donations for every one dollar of fundraising expense — how efficient the organization is at raising money.

The higher the ratio, the more efficient the fundraising efforts. You can also do this for specific special events.

In summary, key performance indicators can be helpful tools in management and strategic planning for not-for-profit organizations. To be most meaningful, KPIs should be customized to fit the goals and needs of the specific not-for-profit organization.