Just like a for-profit, a nonprofit needs actionable financial intelligence to make strategic decisions for the long-term success of the mission.
In many ways, decision-making for a nonprofit is more complex than in a for-profit business. Nonprofits must take into account non-financial measures and make decisions based on outcomes and impacts which are often hard to measure. Just like a well-run business makes “data-driven” decisions to drive measurable results, a nonprofit needs financial intelligence to help management and the board make decisions that will create outcomes that “fulfill the mission.”
What decisions do you need to make?
What are the drivers of those decisions?
What data do you need to measure and monitor those drivers?
Unfortunately, many Executive Directors and board members for nonprofit organizations find it challenging to properly manage their financial operations, no matter how good the cause. This can diminish the organization’s growth potential and prevent it from fully realizing the potential of its work.
How Financial Intelligence Can Help You Fulfill Your Mission
Actionable financial intelligence comes from reports designed for making strategic decisions that will help increase desired outcomes. If your board and stakeholders are looking at reports, you want to make sure those reports are actionable, not just looking backwards.
You need to have management reports that provide that actionable financial intelligence, designed with data and Key Performance Indicators (KPIs) to get everyone focused on goals that sustainably fulfill the mission.
Traditionally, nonprofit organizations track their financial performance through their financial statements, the big two being the Statement of Financial Position (Balance Sheet) and Statement of Functional Activities (Income Statement). But they only show historical results. Traditional financial Statements don’t provide any insights into how those results were achieved, what corrective action might need to be taken to improve them, or, if the numbers are good, what efforts need to be expanded to keep achieving great results.
If you want to enhance your ability to fulfill your organization’s mission, it’s crucial to create streamlined, transparent financial systems that provide monitoring and evaluation of your programs.
Making Data-Driven Decisions
You need management reporting as much as for-profits do to effectively run the organization. This will allow you to make data-driven decisions that drive more successful outcomes. In essence, this is no different from how for-profit companies need to run and organize their finances in order to be successful.
Our latest eBook, The NonProfit's Guide to Making Data Driven Decisions, was designed to help Executive Directors, Presidents, CEOs, CFOs, and nonprofit board members design and implement a management accounting system to help their organizations get the right financial information to make better strategic decisions.
This eBook will show you how to make data-driven decisions for better outcomes using a Five-Step Framework:
- Define Your Mission
- Focus on the Core Program Decision Matrix
- Identify the Outputs that Drive Outcomes
- Design a Management Reporting System
- Make Data-Driven Decisions
It’s all about getting the right information that will allow you to take action. To make a decision with the best available intelligence that will increase outputs and improve outcomes.
By doing the work to get the data that drives better decisions, you’re ensuring that your programs are optimized and your development dollars are getting the best ROI possible.