When you glance at your car’s financial dashboard, you see plenty of useful information that helps you operate the motor vehicle, such as how fast you are traveling, how far you have traveled, and how much fuel you have before you need to stop at a fuel station. A dashboard resembles a car dashboard in that the helpful tool provides you with snapshots concerning the financial health of your nonprofit organization.
You should generate quarterly financial reports, although monthly financial reports provide you with more current and actionable information. However, generating financial reports is not the same as understanding the implications of the reports. Installing a comprehensive financial outlook helps you understand the financial status of your nonprofit organization, identify trends, monitor progress toward goals, and make data-driven decisions. It also allows leadership to proactively address issues and allocate resources more effectively, ensuring long-term sustainability.
What is a Financial Dashboard?
A dashboard represents a tool that provides you with key financial data, which often presents itself in some type of graphical format. The visual presentation of key data makes it easier to understand where your nonprofit stands financially, as well as how well it is doing compared to previous years. The dashboard that you refer to should include the key pieces of data for your nonprofit organization. Nonprofits differ on the types of important financial data they should review. However, most nonprofit organizations need to analyze the same few key pieces of data that should be represented on a financial dashboard.
Working with a dashboard delivers several benefits. You receive a single point of information concerning the financial status of your nonprofit. A financial dashboard generates data that comes from a wide variety of internal and external sources. Instead of pouring through mounds of complex data, a financial dashboard simplifies data by presenting it through visual means, such as the presentation of easy-to-view graphics. You can set up a dashboard to include an automatic alert feature to give you a heads-up when the system detects a serious financial issue. Sending automated email reports to important stakeholders is another benefit of integrating a dashboard into your financial reporting system.
What Key Financial KPIs and Metrics Should I Include with a Dashboard?
Using a financial dashboard to take your nonprofit to where it wants to go starts by receiving a synopsis of operating results, as well as the level of unrestricted net assets. Knowing the current debt ratio of your nonprofit helps you determine whether you need to organize an imminent fundraiser or instead focus more on allocating the financial resources that your nonprofit has already acquired. A summary of the organization’s cash flow provides a snapshot concerning the financial health of your nonprofit organization.
Current Ratio
The current ratio educates you about your nonprofit’s ability to meet debts coming due within the next 12 months. This dashboard snapshot divides current assets by current liabilities. If you produce a current ratio of greater than one, you should be able to meet the deadlines for debts over the course of the next year.
Year-to-Date Revenue and Expenses
You must know how revenue and expenses impact the monthly and annual budgets of your organization. This dashboard snapshot keeps you informed about whether revenue and expenses remain in line with projected expectations. Setting up an alert system for this metric helps you prevent cost overruns.
Expense Efficiency Ratio
The expense efficiency ratio is an especially important dashboard metric for nonprofit organizations. This ratio demonstrates how much funding goes to programs versus administrative and other types of operating expenses.
Ernst Wintter & Associates provides California nonprofit audits, broker dealer audits, tax services, and 401(K) audit services. Contact us for more information.
