3 Financial Metrics to Watch Closely Each Month For Your Nonprofit
Our philosophy at Blue Fox is that social impact organizations will thrive if they pay as much attention to financial management as they do fundraising, events, and marketing. There are so many resources (conferences, webinars, ebooks, and consultants) in the “fun areas” of nonprofit management but not as many focused on nonprofit organizational growth through financial stewardship. Insert Blue Fox! We are that resource and are here to support your organization’s back office.
We know nonprofits meet regularly, some even monthly, with boards or finance committees to review the financial state of the organization. We’ve been in those meetings and we understand that financial literacy does not always span the entire boardroom. In fact, many new executive directors struggle to pinpoint exactly what financial information to discuss with board members. Side note: Our team can help with that!
But for now, we want to share a helpful article from our friends at Intuit Quickbooks. Per their advice, here are three financial reporting items your organization should keep a keen eye on.
1. Restricted vs. unrestricted funds. Instead of looking at funds as one big pool of money, there needs to be a designation between restricted (money that comes from designated giving) and unrestricted cash. A simplified way to decipher between the two types of funds is to create a P&L statement and balance sheet in three columns. The first column lists out the net assets without donor restrictions; the second column lists net assets with donor restrictions, and the third column is the total.
Pro tip: Use the location feature in QuickBooks to set this up and simplify reporting.
2. Revenue model structure. Reviewing your nonprofit’s revenue model monthly allows for adjustments to be made when funding is a little wonky. The next time you review your revenue model structure look for total income earned, total contributed income, then track what percentage of funds are coming from which area. Identify if there is too much funding from one revenue stream and then decide if income should be diversified.
3. True program cost. Now, this might seem more like an annual process activity but for nonprofit organizations where cash flow is tight and decisions need to be made about cutting programs, a true program cost needs a monthly review. [Learn more about the importance of cash flow for nonprofits.]
If you have any questions about the financial status of your nonprofit or about any of these reporting items before your next board meeting, feel free to give us a call at (321) 233-3311 or email us at hello@yourbluefox.com. We’ll get you sorted! Then you can focus on what really matters: your mission and serving your community.
Here are some other articles you might enjoy reading:
5 Steps to Solving Complex Workflow Problems
Accounts Payable Made Easy
5 Tips to Get a Clean Audit Every Year
