Friday, October 31, 2014
Benchmark your way to donors
Posted by Armanino Nonprofit Team
Nonprofit CFOs have a responsibility to be their organization’s fiscal educator. In fact, an estimated 75% of the staff at any nonprofit doesn’t understand the financial side of the operation, and that’s a missed opportunity.
For example, think of a child trying to raise money as part of a school project. The child can turn to relatives and achieve one level of results. But if the child can take the message to everyone in the social media contact list of all of those family members, the results rise exponentially.
The same can be true for nonprofits, if they can successfully arm their staff and even their volunteers to tell the nonprofit’s story. The only way that can happen is if the CFO can use the numbers to validate the nonprofit’s position and give this army of new fundraisers a compelling story to tell.
Building that story starts by benchmarking your nonprofit’s performance in the key areas of financial stability, operational efficiency and areas of focus. Identifying your peers isn’t as simple as it sounds. Perfect matches are rare and smart nonprofit CFOs look for similarities first before considering differences. Look at mission and size. Turn to your sector’s associations for ideas, help and in some cases data. Dig into the numbers from 990 forms, annual reports and Charity Navigator.
When identifying metrics, don’t identify more than 10 that tell your story best. Then, list the most important key performance indicators (KPIs) for nonprofits as:
- Cash flow
- Operating reliance
- Program efficiencies
- Fundraising efficiency
Armed with a story that uses benchmarked numbers that validate the nonprofit’s performance, an organization’s staff can be energized to share that story with their network, opening a whole new realm of potential donors.
Of course, there are many other good reasons to benchmark your nonprofit’s performance. Executives and the board need the information to set policy and steer the ship. And talking with others who may have mastered a particular area can provide important insights that can improve your performance.
Nonprofit organizations have specialized audit, tax and operational needs that require specialized service. Armanino has been committed to the nonprofit sector since 1953, and we now work with more than 500 nonprofit clients. This hands-on experience gives our staff of CPAs and former CFOs a deeper understanding of the issues nonprofits face, so we’re able to meet their needs and help them fulfill their missions in the most efficient, cost-effective way possible.