It's a transformative time for nonprofit growth as organizations work to advance their missions in a time of fundraising shortfalls, economic uncertainties and day-to-day challenges just keeping up.
In aggregate, nonprofit giving
Across the board, nonprofits have an immense opportunity to examine operational processes and improve the execution of fundraising, donor engagement and stewardship initiatives that ultimately support greater success and sustainability. As nonprofits transform operations to be leaner and more efficient, we'll explore ways to diversify revenue streams and ensure an organization is positioned for overall organizational health.
Creating sustainable infrastructure
Nonprofit development and accounting departments are working toward the shared goals of sustainable growth and accomplishing their mission. While accounting departments focus on financial optimization and work to ensure the organization is best positioned for efficiency, development departments face the almighty task of procuring the funds to make operations possible.
Considering decreasing revenue, 73% of nonprofits are concerned about long-term sustainability, according to 2023 research from the Pacific Consulting Group. Solving those concerns falls to both departments. From tracking and influencing mission-critical financial metrics to measuring campaign and individual revenue stream performance, understanding these underlying metrics is crucial to creating a sustainable giving infrastructure.
In 2023, donations, grants and events were the top three revenue streams nonprofits relied on, according to the Pacific research. While these areas represent the most significant opportunities for development departments, having a healthy mix of all revenue streams is crucial. To be successful, nonprofits should also examine and consider how recurring giving, peer-to-peer campaigns, text-to-donate initiatives and silent auctions factor into fundraising.
Donors are at the center of that plan, and how nonprofits handle donor management is critical to sustained success. Accounting connected to a customer relationship management database provides 360-degree visibility into the donor lifecycle and how those dollars impact operations. As nonprofits tell their financial story and mission impact, it ultimately increases the likelihood and willingness for those donors to give again and become repeat contributors.
Data is the throughline that keeps donors engaged, making accounting and development success possible. Understanding and analyzing how each revenue stream impacts organizational health is critical when considering future initiatives. Using insights like gift codes, growth and conversions gives nonprofits a better understanding of losses, profits and overall financial health and can help shape campaign goals before launching a campaign.
It's crucial for nonprofits to use data to shape campaigns and operations. Consider these financial KPIs and how they affect operations:
● Donation growth rate;
● Net fundraising and public support;
● Fundraising ROI;
● Grants secured;
● Administrative/program efficiency;
● Defensive interval ratio;
● Liquid unrestricted net assets;
● Quick ratio; and
● Debt ratio.
Where those figures demonstrate where your campaigns and initiatives are succeeding, it's just as essential to consider non-financial KPIs. These KPIs demonstrate how nonprofits are accomplishing their mission. Consider:
● Donor retention rate;
● Number of patrons served;
● Membership growth;
● Program attendance;
● Volunteer satisfaction and retention; and
● Volunteer and donor engagement.
Together, both KPIs shape the basis of reporting and donor communications. Regular communication with donors is critical to donor relations to keep them engaged. Transparent financial reporting builds trust and strengthens relationships with donors, encouraging continued support, and it lets donors know how their donations are making a difference. To maintain the donor relationship, incorporate both financial and non-financial KPIs. Donors are invested in the nonprofit's mission and want to feel like a valued team member. Reporting is how nonprofits can strengthen relationships with donors and turn one-time donors into recurring donors.
As accounting and development departments work together to accomplish their mission, data provides the infrastructure to influence campaigns, growth, and operational success. Technology provides the tools to move initiatives forward.
As nonprofits seek solutions for decreasing fundraising revenues, examine how interconnected your fundraising and accounting departments are and consider whether it's time to transform the technology and underlying operational processes to create a foundation for sustained nonprofit success.
