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Thanks for this article to Jackie McLaughlin, CPA, Quality Control and Learning Manager at Chazin & Company. Jackie is a seasoned accounting professional with over 35 years of accounting experience, 18 years specific to nonprofit accounting. She is responsible for quality control, training, and financial reviews, through which she helps nonprofits achieve financial integrity and operational excellence.
In a Nonprofit Finance Fund survey of 2,206 nonprofit organizations, 52% reportedly had three months or fewer cash on hand, while 18% had just one month or fewer. These numbers highlight how quickly financial instability can emerge when organizations lack visibility into their progress toward—or away from—their financial targets.
Setting a goal, such as maintaining six months of cash on hand, and actively tracking progress toward it can significantly improve outcomes. In fact, research from Harvard Business School shows that tracking progress toward a goal can increase the likelihood of achieving it up to 70%.
Cash reserves are just one example. Nonprofits can apply the same data-driven approach to a wide range of financial and operational goals, from capital campaign performance to volunteer retention to strategic plans for the future. By analyzing data and consistently measuring progress, leadership teams gain the insight needed to validate what’s working and adjust when it’s not.
This resource will guide you through how to monitor financial progress to ensure your mission remains resilient and future-proof through an unpredictable fiscal environment.
Establish Key Financial Metrics
The first step in tracking nonprofit financial goals is understanding what you’re tracking and why it matters. Data without purpose rarely leads to insight and often creates unnecessary work for already stretched teams. To make tracking meaningful, nonprofits must identify the key performance indicators (KPIs) that accurately reflect financial health and progress toward organizational goals.
The right KPIs turn raw numbers into actionable insight. While the metrics you choose will depend on your strategy and priorities, the following KPIs are commonly used to evaluate nonprofit financial performance:
- Fundraising Return on Investment: Measures fundraising efficiency by comparing the money raised to the costs incurred.
- Formula: (Total revenue – total costs) / total costs = fundraising ROI (%)
- Operating Reserve Ratio: Indicates how long an organization can cover expenses without new revenue.
- Formula: (Available resources / annual or monthly expenses = months of coverage or percentage)
- Revenue Growth Rate: Measures the percentage increase or decrease in revenue over a specific period.
- Formula: (Current period revenue – previous period revenue) / previous period revenue × 100 = revenue growth rate
- Cost to Raise a Dollar: Shows the value generated from fundraising expenditures.
- Formula: (Total fundraising expenses / total funds raised = cost to raise a dollar)
- Program Efficiency Ratio: Reflects how much total spending is directed toward mission-related programs rather than administrative or fundraising costs. A higher percentage indicates more resources are supporting services.
- Formula: (Program expenses / total expenses = program efficiency ratio)
- Average Gift Size: Helps analyze fundraising effectiveness and donor behavior.
- Formula: (Total donation revenue / total number of gifts received = average gift size)
- Donor Retention Rate: Measures the percentage of donors who continue giving year over year, signaling donor loyalty and engagement.
- Formula: (Repeat donors / total donors from the previous year × 100 = donor retention rate)
There are hundreds of KPIs nonprofits can track, but focusing on a select few that align closely with your goals will make monitoring progress more effective and manageable.
Once KPIs are defined, the next step is identifying reliable data sources. Financial statements, accounting processes, donor management platforms, and annual reports all play a role in providing accurate, timely data. Ensuring these systems are properly aligned (and that data is consistent across sources) lays out the foundation for meaningful analysis and informed decision-making.
Regularly Review Your Budget
Nonprofit financial goals are not static. They evolve as economic conditions shift, funding fluctuates, and organizational priorities change. Revenue variability, reduced donations, and policy changes can all require nonprofits to adjust their financial strategies to maintain stability and maximize mission impact. That’s why regularly reviewing your budget and financial activities is essential to staying aligned with your organization’s goals.
Ongoing budget reviews help ensure that resources are being directed where they matter most. Key areas to monitor on a consistent basis include:
- Monthly reconciliations
- Budget variances
- Cash flow
- Budget vs. actuals
- Restricted and unrestricted funds
Reviewing these data points regularly provides timely insight into financial performance and allows leadership to address potential issues before they escalate.
In addition to supporting sound financial management, consistent budget monitoring also strengthens audit readiness. Maintaining organized receipts, grant agreements, and clear methodologies for expense allocations throughout the year can help ensure a clean, efficient, and worry-free audit.
Evaluate Recurring Revenue
Recent fundraising trends show long-term fundraising strategies are increasingly taking priority, meaning that recurring donors and membership programs are proving critical to building sustainable revenue models.
Donors who feel connected to the mission, confident in an organization’s leadership, and appreciated for their support are more likely to give consistently, even during periods of economic uncertainty. As Team Allegiance explains, recurring gifts provide a dependable revenue stream that helps nonprofits weather fluctuations in one-time donations.
This is especially true for membership-based organizations. Unlike the volatility often seen in general fundraising, a strong membership program creates predictable cash flow through recurring payments, whether structured dues or voluntary contributions. That consistency enables more confident long-term planning, supports program expansion, and reduces reliance on short-term fundraising spikes.
To effectively track and analyze recurring revenue, nonprofits should focus on a few key practices:
- Align goals with membership tiers: Ensure membership levels and benefits are structured to support revenue targets while delivering clear value to members.
- Track churn rates: Monitor how many recurring donors or members discontinue their support over time to identify retention challenges and opportunities for improvement.
- Consider in-kind contributions: Account for in-kind support alongside recurring revenue to better understand overall financial capacity and cost savings. According to Chazin, the best way to do this is to record the gift at its fair value and enter its net value as zero, since your nonprofit’s cash reserve doesn’t change.
Regularly evaluating these data points allows nonprofits to strengthen donor relationships, improve retention, and build a more resilient revenue model that supports long-term mission success.
Consult a Professional Accountant
Goal setting and subsequent progress tracking are not easy asks for a team already overloaded with daily responsibilities, monthly financial tasks, and mission-focused needs. The consistent attention that progress tracking demands can outpace the capacity of a busy Executive Director or in-house bookkeeper.
Outsourced accounting may be an important step your organization takes to help you get closer to achieving your objectives. With the right accounting partner, nonprofits gain clearer visibility into financial performance, stronger controls, and the data-driven support needed to move closer to their financial goals.
Tracking Financial Goals is a Mission Driver
Tracking financial progress isn’t just about meeting targets or confirming that numbers align; it’s about ensuring your organization can deliver its commitments to the communities it serves. Clear visibility into financial performance gives nonprofit leaders the confidence to make decisions that protect and advance the mission.
Financial goals will continue to expand, evolve, or shift entirely in response to external pressures, such as economic downturns, as well as internal factors, such as leadership decisions and changing community needs. A data-driven approach provides an accurate, real-time understanding of financial standing, ensuring your organization has the resources to adapt, remain resilient, and propel its mission forward.
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