Best Practices for Non-Profits: How to Maximize Every Donated Dollar

Jennifer Cavender05.11.18

As part of the executive staff of a non-profit, you work hard for every dollar you bring in the door. Since the financials and tax filings of non-profit organizations (NPO) are public information, your contributors are looking carefully at the percentage of funding you spend on program costs versus general and administrative (G&A) expenses and fundraising. It makes sense that donors want to contribute to organizations that are putting their money to good use. Additionally, NPOs that receive government funding have limits on reimbursement for G&A or overhead costs. You must keep these costs low in order to successfully administer your programs.

 

It’s imperative that your organization make efficient use of the funds you raise if you want to continue to attract donors and fulfill your mission. So, how can you increase your organization’s efficiency? How can you make your donated dollars go further?

At Haskell & White, we work closely with non-profits on many levels. Not only do we provide valuable accounting and business advisory services, many of our staff volunteer their time or serve on the boards of local organizations. Here are some of the best practices your non-profit can put in place to gain the most value from every dollar you bring in.

Track your efficiency

To achieve progress, it’s best to be fully aware of your starting place and document it in measurable terms. By developing a list of key performance indicators (KPIs), you can get a better understanding of how much effort it currently takes your organization to fulfill your purpose or to raise money. These metrics help you quantify your progress, generate momentum to keep going, and allow you to set attainable goals. You might consider tracking a few production ratios like the following:

  • Return on fundraising event or grants (Net fundraising event revenue/Fundraising event costs)
  • Total Fundraising Efficiency Ratio (Fundraising Expense/Contributions income)
  • Efficiency of fundraising events (Fundraising event revenue/Number of hours spent)
  • Mission efficiency (Annual number of lives changed/Total annual hours incurred)

A few financial ratios that you might consider are:

  • Defensive interval ratio (Cash, securities, receivables/Average monthly expenses)
  • Liquid funds indicator (Total net assets – Restricted net assets – Fixed assets/Average monthly expense)
  • Savings indicator (Revenue – Expenses/Total expenses)
  • Program service expense ratio (Program expenses/Total revenue)

Build “progress” into your process

Once you have established the KPIs that will help your team evaluate your organization, design a method to review those metrics regularly with leadership and the rest of your staff and take time to praise the positive results that your organization has achieved. Then, strategize with your leadership team to improve the areas with the biggest gap between your target and your achieved results. Leadership should maintain a consistent focus on implementing new strategies with the goal of reducing the gap. Finally, design a process to solicit feedback on these new strategies and make tweaks along the way.

Streamline your accounting practices

An accounting department usually only comprises a small portion of a non-profit’s G&A costs. However, there are areas where accounting functions can become a source of inefficiency, so it’s smart to strengthen your accounting processes where you can.

Reduce redundancies by cutting down the number of steps to get things approved and ensuring that you are not entering data into multiple systems without a benefit. Trim the red tape and streamline your approvals and decision-making processes. Standardize as much as possible, so you are not forced to recreate the wheel at every month-end close. Don’t shy away from investing in technology if it will deliver a significant return. Use current, up-to-date software programs that allow you to close the books quickly and report information necessary to manage your organization.

Finally, make sure the members of your staff have the appropriate skills necessary to perform the tasks needed. Paying less for someone who will put the organization at risk due to inaccurate or untimely record keeping will cost more in the end. Consider a well-qualified contractor to review the books each month, to ensure accuracy and timely reporting.

Think fresh, stay nimble

The current fundraising environment is always changing. Staying mired in the same fundraising patterns can cause your efforts to flat-line. Look for donors in new areas, beyond your go-to geographic locations, demographics or age groups. Brainstorm ways to create an emotional connection between your mission and new contributors. Employ the innovative use of teams and invest in new technologies to elevate the amount of dollars you bring through the door.

Haskell & White, through our advisory services, can help non-profits with these strategies and more that will ensure you maximize your dollars. We facilitate strategy discussions, train leadership to help teams move through each problem efficiently, provide online training courses, and mentor individuals to use their current strengths to amplify an organization’s effectiveness in the community. This guidance not only delivers quick gains but also charts a course for long-term success.

Maximizing your dollars is important on many levels: it keeps contributors giving, keeps volunteers returning, keeps employees happy and ensures that you are able to continue to realize your organization’s vision. Remember, it takes consistent focus and hard work to be efficient and effective with your revenue dollars. There is no one-time solution, but an ongoing commitment to better your organization, so you can continue to do the work of improving your community.