What are outcome metrics? Outcome metrics are powerful, essential tools for demonstrating accountability and transparency.
With intense competition for donor dollars—and funders insisting on greater accountability and visibility—nonprofits must show fiscal responsibility as well as program results.
Outcome metrics can measure financial or non-financial criteria that reflect an organization’s, program’s, or initiative’s efficacy. They’re derived by carefully defining outcome indicators, data-collection methods, analytical techniques, and presentation vehicles that collectively show a rich picture of organizational performance. These outcome metrics may go by many names and fit in countless categories. Many nonprofits obtain their best results by measuring across multiple dimensions for blended scorecards that encompass activities, capacities, financial results, and other metrics. Ultimately, well-defined outcome measures help organizations to continuously adapt and improve.
For so many nonprofit organizations, the daily tasks of accounting and financial management are inextricably driven by a broad array of complexities. Beyond the basics of accounts payable and receivable that everyone needs, fund accounting software must respond to a distinct set of standard documents, including statements of activities, statements of financial position, statements of cash flow. Some nonprofits operate for-profit subsidiaries and others sell items on a break-even basis, but many depend on donated monies, fundraising, and other sources. They might receive grants and directed donations – perhaps dozens, even hundreds, of separate income streams – and each of stream containing a donor rightfully expecting to know how their investment is faring. Accounting software for nonprofits should create separate closes for each revenue source along with a regular series of specific reports, each with its own unique requirements, for every funder.
Those demands mean the online accounting software for nonprofits must offer an extraordinary level of flexibility.
Nonprofits face stringent requirements for reporting and transparent operations – and those hurdles are multiplying. The right financial infrastructure can help nonprofits “know and show” what’s happening in every aspect of their operations with superior speed and clarity. Additionally, prebuilt FASB 958 reports and dashboards accelerate compliance with the new standards and streamline conveying their financial story to the board and other stakeholders. These capabilities better equip agencies, social-service organizations, charities, and other nonprofits to acquire, secure, and maintain funding sources to pursue their mission to the fullest extent. Transparency is an essential strategy for securing and keeping those donors and sponsors on board. Even internal reporting requires new levels of efficiency. When nonprofit board members – who are often successful executives from different business disciplines – convene to review the organization’s status, they’re increasingly expecting the same caliber of reporting and analysis they see in the for-profit world. Fund accounting software for nonprofit organizations must take this into account.
Outcome metrics deliver value only if they are tightly linked to your core values and mission.
It’s best to start with a simple template that defines what matters—your organization’s short- and long-term objectives—and the impact measures that effectively map to them. Set goals and strategies that help ensure your activity measures support the overarching mission. These might include progress toward goals, and program implementation; e.g., projects launched and sites protected. Finally, drill down to define the supporting tactics and activities. These might be measures of memberships, funding, or growth in fundraising. However you establish and define your outcome metrics, keep it simple—and never lose focus of what truly matters to your organization. Outcome metrics include all measures that reflect organizational performance and impact. These can include performance, outcomes, capacity, financial, or sustainability.
- Program efficiency: This metric may be the most important for many charity evaluators, board members, and donors because it shows how funds are used for overhead, or for making progress.
- Revenue per member: Many membership-based organizations rely heavily on membership dues and program fees.
- Fundraising efficiency: How much do you spend to raise a dollar? This metric shows how efficiently your organization raises funds.
In the mission-driven nonprofit world, accounting fund accounting software can sometimes slip down the priority list. It’s not always easy to allocate budget dollars to back-office infrastructure that doesn’t directly support the nonprofit agenda and harder to find the time and expertise to make it all work.As you pursue a strategy based on outcome metrics, consider your financial management solution and how it can simplify the process.