For-profit organizations have shareholders and others who demand to see the return on investment, but how can you measure outcomes in nonprofit financial management? The key is to broaden the definition of measurement and the scope of what you can measure to include the impacts that matter most to your nonprofit’s stated mission.
Measure the Good
Yes, financial metrics are important. Where would nonprofit financial management be without measuring income versus expenses and other financial measures of success?
Yet that’s not all there is to it when it comes to the nonprofit world. Nonprofits are also judged by how well they fulfill their mission. GuideStar and Impact Genome Project are two organization that are helping to measure such an impact.
GuideStar recently launched GuideStar Platinum. This is a platform in which nonprofits can self-report on metrics. About 20 percent of the more than 12,000 metrics shared on the GuideStar platform represent impact-based outcomes. The rest are other metrics that each individual nonprofits deem important.
Mission Measurement curates the Impact Genome Project, which offers a unique window into research on nonprofits. Impact Genome aggregates over 10,000 research items. It seeks to identify patterns of what is working in the world of nonprofit financial management, nonprofit management and more. If it can identify what works, the thinking goes, nonprofits can also avoid what does not work.
Data, Data Everywhere – Is It Really Important to Nonprofits?
Why bother with data?
Data represent facts. It’s easy to measure certain outcomes. You can quantify how many donations were entered into last year’s books, how many dogs were saved from the animal shelter, how many meals were given out at the soup kitchen.
Outcomes data is now entering the world of nonprofit financial management. It’s currently used in medicine where many hospitals now chart both quantitative data (the number of patients who attended a seminar on smoking cessation) and the outcomes (how many patients returned for follow up a year later and had quit smoking). Both measures offer useful information, but together, they help hospitals understand how effective their programs are within the local community.
Nonprofits can also measure outcomes data. A nonprofit animal rescue can measure both how many dogs were adopted out to loving homes as well as how many spay/neuter vouchers were actually used by the local community. Both measures can help them gauge how well they’ve moved towards their goal of reducing the number of unwanted pets locally.
As a nonprofit financial management professional, your organization may turn to you for leadership tracking both quantitative data and progress towards achieving the mission or outcomes measurement. Think about how to accomplish this with the resources available and work on a plan to start measuring both activities and outcomes.
Data Reassures Donors
Donors need to see that their gifts are going towards the fulfillment of the mission. Without such clarity and insight, donors may feel suspicious about the nonprofit. Nonprofit financial managers would be wise to provide as much transparency as possible to donors.
One organization, GuideStar, helps provide this information to the general public. GuideStar data enables donors to:
- Research potential nonprofits
- Read their financial reports
- Understand how well their money is spent to support and sustain the nonprofit mission
- Review leaders, salaries, money spent on overhead and more
- Read answers from the nonprofit on specific initiatives
- Contact the organization
Nonprofits that provide quantitative, as well as qualitative answers to these questions to groups like GuideStar, provide transparency to their potential donors. Donors look for metrics they can understand before giving money. They want to see not just quantity, but quality.
Data Needed Now
Both GuideStar and Impact Genome Project rely upon data. Now is the time to talk to your team about the systems you have in place to collect data. If these systems are antiquated, poorly maintained, or collecting dust, find out why. It may be time to buy new software to track important data and outcomes. Your donors and constituents depend on it.
Beck & Company
Beck & Company is an independent certified accounting firm offering accounting and tax service for nonprofits, nonprofit financial management, auditing services and more. Since 1987, we have helped many nonprofits in the Washington D.C. area and along the Eastern seaboard with their accounting and financial management needs. We provide audit, tax, accounting, and consulting service that addresses all aspects of a small to mid-sized nonprofit organization’s business. Contact us or call 703-834-0776 x8001.