Measuring what matters in Nonprofit – Outcome metrics

Outcome metrics are powerful, essential tools for demonstrating accountability and transparency

They can measure financial or non-financial criteria that reflect an organisation’s, program’s, or initiative’s efficacy. They’re derived by carefully defining outcome indicators, data-collection methods, analytical techniques, and presentation vehicles that collectively show a rich picture of organisational performance. These outcome metrics may go by many names and fit in countless categories. Many nonprofits obtain their best results by measuring across multiple dimensions for blended scorecards that encompass activities, capacities, financial results, and other metrics. Ultimately, well-defined outcome measures help organisations to continuously adapt and improve.

The importance of outcome measures can be seen from a variety of perspectives and functions within the nonprofit organisation

These include:

Funding: In a competitive environment, the ability to define, measure, monitor, and report the metrics that define success can encourage new and additional funding from donors, foundations, and other benefactors. For instance, demonstrating achievement of key milestones can unlock subsequent rounds of multi-year grants.

Accountability: Funders are increasingly tying their support to stringent accountability. They want to see where their monies are going and the results that are achieved whether it’s organisational growth and new locations or more nonprofit partnerships and matching funds. Nonprofits must provide exceptional transparency into the organisation’s outcome metrics, controls, and reporting.

Stewardship: From development and accounting to operations and programming, the ability to define, track, and report outcome measures—showing where you are and where you want to go—will help ensure good stewardship. This, in turn, will boost donor confidence and strengthen your credibility—which supports your growth and your ability to pursue your mission.

With intense competition for donor dollars—and funders insisting on greater accountability and visibility—nonprofits must show fiscal responsibility as well as program results

Charity Navigator, the premier charity evaluator, has for years used very specific financial metrics when computing its nonprofit ratings, which have a significant impact on nonprofit funding. Now the organisation has declared that financial metrics are not enough, and they will begin tracking outcome metrics—and the reporting of those measures.
Your efforts to track outcome metrics for your organisation will encourage accountability among other organisations while building your credibility and reputation. You can expect your community to become more engaged and supportive—resulting in a virtuous cycle of greater visibility, strengthened credibility, and a more committed support network.

Example: Fundraising efficiency

Modern fund accounting software can easily track and tag your expenses and revenue to automatically calculate and report on this key metric. For example: If your annual gala raises $1,500,000, and costs $350,000, your fundraising efficiency is $0.23. It costs you $0.23 to raise $1.

Why the right financial software system matters

As you pursue a strategy based on outcome metrics, consider your financial management solution and how it can simplify the process. A modern, fund accounting solution will automatically tag and track your data by key dimensions—giving you instant visibility and insights so you can proactively manage locations, programs, members, and funds. The right system can provide access to statistical data that enables you to automatically calculate key metrics such as financial (revenue), statistical (membership), or a combination (donations per attendee).
And it can offer the visibility, automation, access, and adaptability you need to grow your organisation and succeed. Whether you benefit from fast and easy reporting or automated processes that yield greater efficiencies, you will be a better steward of the funds you have. Perhaps you want to measure attendance, volunteer hours, meals served, immunisations given, or constituents funded. The key is to integrate and calculate those statistics against budgets, plans, projects, and expenses. For example, if your organisation is membership driven, you may want to track revenue by membership count compared to the prior year. Metrics such as these let you easily monitor, track, and report on outcomes. A bestin-class financial management solution can do it all—within your system of record.

Take the first step: Define the key metrics that best measure what is most important to your mission

Don’t get bogged down with tactical issues such as “Who will measure what—and when?” The subsequent details and processes follow naturally—especially when you use a modern financial system to make it easy. Take advantage of external resources to get up to speed quickly. You may have too few or too many metrics, but consistent progress brings success. Balance your approach with measures that reflect the complete picture of your organisation’s health and impact. Measuring and reporting outcomes will require extra effort. But doing so brings immediate and long-term benefits to the organisation as well as its funders and constituents.

Contact us at Akuna Solutions and find out from a Sage Intacct implementation specialist how your organisation can achieve the best outcome metrics with the right cloud accounting software.

Photo by Markus Winkler on Unsplash