Running a nonprofit is not for the faint of heart. From the outside looking in, nonprofits can seem simple: donations come in, good works go out. However, as all who have braved the inside of a nonprofit organization can tell you, still waters run deep. Case in point: ratios. For this reason, we have compiled 8 resources that helped our organization better understand ratios and their use.
1. CBIZ: Nine Ratios to Help Measure Your Not-for-Profit's Financial Health
CBIZ provides professional advisory and accounting services for nonprofits and for-profits. Ratios are a great way to learn about your organization. They can show where your nonprofit is excelling and where it can improve. This article describes 9 simple ratios that every nonprofit can use. Check out the article here!
2. Forbes: How to Evaluate a Charity
Every year, Forbes puts together a list of the top 100 charities. They are rated based on the results of 3 ratios: Charitable Commitment, Fundraising Efficiency, and Donor Dependency. This article describes the ratios and the industry standards. For example, all the charities on the list, at least 70% of their total expense went towards their programs. Check out the article here!
3. Forbes: Sample Financial Ratios Formula PDF
The Forbes Funds put together a simple PDF table that outlines the actual formulas used to figure out ratios. Included, is the Financial Vulnerability Index (FVI) Model. Daunting though the title may be, this model can be used to figure out how an organization will fare when they take financial hits. Check out the PDF here!
4. Propel Nonprofits: 990 Decoder
If you look up "complicated" in the dictionary you will find a link to the IRS Form 990. Not really, but if you have the right tool, an organization's 990 can be a wealth of information. This is where Propel Nonprofits comes in. They have created an excel workbook that will run some common ratios for you. All you do is input the information. The workbook already has all the formulas in it! Check out the sheet here!
5. Charity Navigator: How Do We Rate Charities' Financial Health?
Known as a resource for verifying charities, Charity Navigator has outlined the various ratios they check when rating an organization. They were even kind enough to include the actual formulas used to determine the ratios. If you are preparing to be rated by groups such as Charity Navigator, it's a great resource to take advantage of. Check it out here!
6. Guidestar: Why Ratios Aren't the Last Word
Similar to Charity Navigator, Guidestar rates the transparency of an organization. However, this article talks about the pros and cons of judging a nonprofit solely by its ratios. While it does provide the formulas for some basic ratios, it also discusses the perils of comparing ratios for nonprofits with differing focuses. Check it out here!
7. BBB Wise Giving Alliance: How We Accredit Charities
As with Charity Navigator, the Better Business Bureau Wise Giving Alliance rates charities. As such, they have outlined 20 standards they hold charities too. 3 of these have to do with ratios. Check out their standards here!
8. SKR+CO: Benchmarking Often Proves Valuable for Nonprofits
Unfortunately, the term "ratio" can leave a bitter taste in the mouth of nonprofits. Instead, this company uses the term "benchmark" in its place. Benchmarking is a continuous process that measures profitability and productivity over time. Then, this data is used to make adjustments to the nonprofits' game-plan. Check out the article here!
We'll update this post as we find more ratio resources! What resources have you found helpful in braving the ratio frontier?
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