Springfield Business Journal_2020-08-28

SPRINGFIELD BUSINESS JOURNAL | ADVERTISING SUPPLEMENT G I V I N G A DV I S E R S Non-profits are increasingly adopting a corporate world tool: financial dashboards. A dashboard is a summary of an organization’s progress toward a specific goal over time — or a snapshot of its current status. Dash- boards are designed to help boards and other constit- uents visualize important metrics or key performance indicators (KPIs); however, to facilitate informed, timely decisions, it is critical to select the right KPIs. Choosing the Right KPIs A non-profit’s financial KPIs will depend largely on factors such as its revenue streams, key expense factors, budget, and strategic goals. To include the most useful metrics, identify your organization’s busi- ness drivers and solicit input from your audience. In addition, determine which factors affect the reli- ability of your revenue streams and which influence expense levels. Then create KPIs that monitor those factors. Think, too, about the level at which you want to track your KPIs. You could monitor them by indi- vidual program/function or at the organizational level. Reviewing an Example Say that a performing arts organization’s board is concerned about financial stability and liquidity. The non-profit’s primary business drivers are proper pricing and maximum attendance. Its dashboard might include KPIs such as an increase or decrease in operating results, the level of liquid unrestricted net assets, current debt ratio (total liabilities/total assets), and progress toward a desired number of months’ cash on hand (cash on hand + current unrestricted investments/average monthly expenses). The orga- nization also would want to monitor the number of tickets sold and average revenue per performance. Over time, this non-profit would likely need to adjust its KPIs as its strategies, priorities, or programs change. As many organizations have learned recently, what was key last year is not necessarily key in today’s challenging environment. Considering Popular KPIs Certain KPIs are popular among non-profits. These include: • Current ratio: This reflects your organization’s ability to satisfy debts coming due within the year. Divide current assets by current liabilities. A ratio of ‘1’ or more generally means you can meet those obliga- tions. • Projected year-end cash: Based on the current cash position plus budgeted cash flows through the end of the fiscal year, this projects liquidity and the ability to satisfy upcoming commitments. • Year-to-date revenue and expense: This measures actual results against a budget and lets you know separately if revenues and expenses are in line with expectations or within a reasonable range. • Program efficiency ratio: The ratio assesses an orga- nization’s mission efficiency by showing the amount of funding that goes to programs versus adminis- trative or other expenses. Calculate it by dividing a program’s expenses by its overall expenses. Developing Meaningful Metrics By providing a target such as budgeted amounts, chronological trends, or external benchmarks, you will make the metrics more meaningful for your audi- ences. Contact KPM for help creating a dashboard with appropriate KPIs. Financial Dashboards that Contribute to Success By Jennifer Schatzer, CPA Crystal Mapp, Gretchen Russell, Keith Seiwert, Jennifer Schatzer, Barb Houser and Leslie Conklin K P M C PA S & A D V I S O R S A D D R E S S 1 4 45 E Re p u b l i c Rd . , S p r i n g f i e l d , M O 65 8 0 4 P H O N E 41 7. 8 82 . 43 0 0 W E B S I T E k p m c p a .co m TO P E X EC U T I V E R a n d a l l M o o t s , C PA 6 2020 GIVING GUIDE