How to Increase the Transparency of Your Nonprofit’s Financial Reporting
Financial Reporting Challenges for Nonprofits
Most of the organizations we work with experience the same challenges. They’re dependent on manual processes, pulling data from unintegrated systems, and have almost no real visibility into their operations. If these issues sound familiar to your organization, you’re not alone. In fact, 70% of nonprofits struggle with at least one of these challenges.
The question is: How can nonprofits increase the transparency of their reporting?
To answer that, nonprofits have to start to by asking a simple question: “Are we meeting our mission?”
To accurately evaluate whether you’re meeting the mission of your nonprofit, you need easy access real-time data. This data should take the form of Key Performance Indicators (KPIs) that tell the story of each unique organization’s success.
What do KPIs look like for nonprofit organizations?
Having a clear understanding of the organization’s KPIs is vital for all nonprofits. First, a nonprofit’s executive team must sit down and decide on the metrics that matter most to their organization. Once these numbers are chosen, every stakeholder and team member will be able to have a clearer picture of what signifies a win. This lets financial departments structure their reporting accordingly.
KPIs will vary from one nonprofit to another depending on your mission, but the following are some examples of these important metrics to measure:
- Clients served
- Number of members added
- Location of services
- Classrooms built
- Beds given
- Meals supplied
- Patients seen
Once you have established the right KPIs, program managers, senior management and board members should have instant insight into the organization. For that to happen, information must have the proper formatting. It also needs to be sharable, easily maintained, and trend-based. To serve these needs, cloud-based financial management systems with dashboards are the best option.
Dashboards: The key to transparency for nonprofits
A variety of modern financial management solutions offer nonprofits an efficient way to capture, analyze, and report data on a daily basis. Simplify your team’s workload with fully integrated systems that manage a variety of financial operations such as membership fees, grant funding, program and services income, and donations — all in once place. These solutions give management teams a simple, yet powerful way to present data through dashboards and reporting features that make it easy to communicate with the board.
The image below is an example of the effective dashboards systems like Intacct can create for organizations.
With these dashboards, you can easily access net assets and separate revenue and expenses by source. CFOs can get a quick snapshot of the organization’s current state with budget vs. actual financial reporting, trend-based charts, and both statistical and dollar-based KPIs.
Dashboards can be created based on the unique needs of each team member. For example, as a controller for a nonprofit, you could customize your dashboard to identify the most important metrics you need to see.
Here’s what that dashboard would look like in Intacct:
Different reports need different data, but all this data—including financial and non-financial performance data—is necessary for a nonprofit to achieve its mission. Cloud-based financial management systems reduce the workload of your team and move your nonprofit closer to its goals. Contact JMT Consulting Group for guidance with deploying the technology to support the complicated reporting process and provide the visibility needed to deliver on the mission.