Assessing the Financial Health of Your Nonprofit Organization

As a first-time executive director, my main concern was whether I could adequately assess the health of the nonprofit I was responsible for overseeing. Over the last year, I have worked with a fantastic accounting agency that has helped me learn and understand our financials better. I do not want to understate how important it is to get professional help when it comes to accounting, especially if you are a one-person development shop.

What financial documents should you be requesting?

• Balance Sheet aka Statement of Financial Position

• Profit & Loss aka Income Statement aka Statement of Activities

• Budget V. Actual

• Ratio/Trend Analysis aka Financial Statement Analysis

Financial Ratios to be mindful of when reading financials:

• Current Ratio – Measures an organization's ability to pay off its short-term liabilities with its short-term assets. Calculation: Take your "Current Assets" and divide by "Current Liabilities."

• Quick Ratio – Measures an organization's ability to pay off its short-term liabilities with its short-term assets. Calculation: Take your "Current Assets," subtract "Inventory," and deduct "Prepaid Expenses," and then take that number and divide by your "Current Liabilities."

• Days Cash on Hand – Measures the number of days of operating expenses that an organization could pay with the current cash available. Calculation: Take your annual operating costs and divide that number by 365. That number is then divided by the total "Cash on Hand."

• Operation Expense Ratio – Measures an organization's operating expenses in relation to its program expenses. Some accounting agencies may recommend a 20/80 ratio, but remember that this may not be feasible, given your organization's mission. Calculation: Take your "Operating Expenses" and divide by your "Program Expenses."

• Operating Reliance – Measures an organization's ability to effectively pay all its expenses from operating revenues alone. Calculation: Take your "Operating Revenue" and divide by your "Total Expenses."

Ratios could help paint a picture of an organization's financial standing and overall financial health. It is important to decide with your Board of Directors where you are all comfortable with each of these ratios.

Financial Health Checklist:

• Operating results are consistently positive (this means a surplus!)

• Total costs are regularly covered by reliable revenue.

• Reinvestments in fixed assets are offset by depreciation.

• Evidence of ability to manage debt and other liabilities.

• Liquidity is sufficient to withstand risk and pursue new opportunities.

Choosing a Donor Management Software

Whether you are starting a nonprofit organization, yearning to switch your donation tracking system from excel, or searching for alternatives to your current software... I hope that this blog post can shine some light on potential options for your small shop nonprofit. Personally, I have used DonorPerfect, GiftWorks, and Little Green Light to manage donors, but I hope to explore other workable options. It is my goal to provide a variety of alternatives while continuing to add to this blog post as I learn and experience new donor management software.

DonorPerfect

Cost: $159 a month with unlimited users, and 2,500 constituent records.

Donor Perfect: the first donor management software that I had the pleasure of using and learning from. I explored this software inside and out, as it taught this 'new' fundraiser about tracking donor movements. I used DonorPerfect, when I was fundraising for a private school foundation, and the software made it easy to manage all kinds of constituent data (donors, prospects, volunteers, alumni, students, corporations, etc.) This software was built for fundraising, and you can manage each of your campaigns (annual giving, special events, major giving, planned giving) inside the software. The software provides you with the tools to track and manage each campaign and its results. One of my favorite parts of the software was its ability to provide reports and effective analysis that was ready to be seen by our Board of Directors. Overall, DonorPerfect is easy to learn and easy to use. Not to mention that their email, chat, and phone support is excellent.

GiftWorks

Cost: $110 a month (Must contact 'Sales' for information and add-ons)

GiftWorks, now a FrontStream program, has since evolved into a cloud-based donor and volunteer management software with built-in fundraising tools. The program allows you to track donor information, donation amounts, email communications, and other interactions. The program also allows you to build standard and custom reports. When I worked on this system, we used the desktop version which required a daily/manual backup. As previously stated, the program has since become cloud-based. Unfortunately, I can't speak to the merits of the cloud-based program. I will say that the new version of the software could eliminate the need to have separate systems that track donors, volunteers, and event participants. Skimming through the reviews from online consumers, there were mixed opinions on the actual return on investment (ROI) for this software.

Little Green Light

Cost: $39 a month with unlimited users, and 2,500 constituent records.

Little Green Light is the current system that I am using. What started as a bumpy relationship has since blossomed into a well-functioning partnership. My organization experiences a large number of memorial gifts, which means MORE one-time gifts and MORE constituent records. That means, the more we grow our donor base, the more the software costs for us (which did not quite add up to me when I first took on my role as Development Director). But, as I have learned the program, this donor management software allows me the opportunity to manage all of our organization's supporters in one place, track all communications, and manage a calendar of tasks. The software has shown to be pretty customizable with an easy-to-use 'alert' system. At first, the reports generated by the software were a bit intimidating, but after taking some time to explore the pre-loaded reports, the standard reports proved to be effective and shareable. My favorite part of Little Green Light is its built-in moves management system which allows you to manage all 'types' of donors as they flow through the relationship-building process. This donor software has an excellent Private Facebook Group that shares resources and tips, in addition to their top-notch customer service and help center.

Network for Good

Cost: $100 a month with unlimited users, and 500 constituent records.

Network for Good, a software that has served over $100,000 in small nonprofit organizations and counting. Although I have not yet used this software, I have been a donor through a variety of nonprofit organizations using the Network for Good platform. This donor management software creates a dashboard that helps visualize campaign progress and year-to-date giving. The software allows you to build filters that create donor lists based on specific giving habits. My favorite feature of Network for Good is its branded online fundraising pages. These fundraising pages are visually appealing and have a proven record of attracting new donors, increasing gift amounts, and driving monthly donors. Check out one of my favorite fundraising pages (and one of my favorite nonprofits), here. Network for Good has developed software that is user-friendly and personalized to allow your small shop nonprofit's mission to shine. But it appears that as your nonprofit grows, so do your donor management costs.

Want to learn more about a particular donor management software? Comment below.

Finding a Mentor

When I think back over the last five years, one of the best things that I have ever done for my career was to find and solidify a mentorship relationship. And, for me, this meant three.

My first job in my fundraising career was as an assistant to a development director with a wealth of knowledge. I made it very clear that I wanted to learn from her, and she took a chance and taught me. I virtually knew very little about fundraising or development, and I credit much of what I know to her. Now, this job is the definition of a small shop. There was 1.5 full-time equivalent (FTE) positions dedicated to raising $750,000. This mentorship taught me the basis of my future career. Every day, we discussed annual giving, major gifts, planned giving, grant writing. She went above and beyond to teach me everything she knew.

When I think about the second mentor that I had, I am not even entirely sure that she even knows that I consider her to be a mentor. She is everything that I have ever aspired to be in a fundraiser. Her career highlights include hundreds of multi-million dollar major gift requests. She was born to be a teacher, and she happens to be an even better manager and fundraiser. We would meet, before work started for the day, and she would teach me how to ask for a major gift, board relations, and so much more.

For my third mentor story, as you may know from my other blog posts, I am a first-time executive director and when I was asked to take this position, I made sure that I had an executive mentor on board to help me. My executive mentor taught me how to be tough and taught me what it means to be a manager. It is invaluable to have a mentor who has a career and/or life that is complementary to your own. Your mentor must be personally invested in your success, and it is this professional mentor relationship that has helped grow my career. She has given me brutal honesty since day one, and has never let me stop pushing.

I consider myself lucky to have known three amazing women, dedicated to teaching me. I understand that many people do not get this lucky. But, I want to empower you to reach out to those that can help you grow. Did a certain person come to mind, as you read through this post? Maybe, someone that you have always wanted to learn from? Someone who has the job or career that you aspire to obtain? Schedule a meeting, and start asking them questions. But first, mentorship is all about sincerity. Make sure you are sincere in your intention to learn. Because, sincere mentorship means that you do not have to go into anything alone again.

Shelby Moore - MPA, CFRE