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AcctTwo Blog

Trend: Nonprofit Financial Transparency Proves Challenging

nonprofit financial transparency

Successful nonprofit organizations have implemented outcome metrics to provide nonprofit financial transparency, measure, and report on their performance. Outcome metrics not only show funders and constituents how the organization is performing; they also help pave the way for sustainable growth and greater efficiency. 

Increased Scrutiny is Trending

The increasing demand for transparency and accountability from donors is compelling today’s nonprofits to seek ways to both produce and demonstrate successful outcomes. A recent survey showed that more than 25% of nonprofits struggle with heightened expectations and increasing scrutiny from several sources—including ever more savvy funders looking for financial management techniques and controls employed commonly by for-profit businesses.

Outcome Metrics - Measure What Matters in the Nonprofit WorldWhat are Outcome Metrics?

Outcome metrics are powerful, essential measurements for demonstrating accountability and transparency. They measure financial and non-financial criteria that reflect your efficacy at the organization, program, or initiative level. They’re derived by carefully defining outcome indicators, data-collection methods, and analytical techniques that collectively tell a comprehensive story of organizational 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 detail activities, capacities, and financial results. Ultimately, well-defined outcome measures help organizations to continuously adapt and improve.

Why Outcome Metrics Matter

The importance of outcome metrics can be seen from a variety of perspectives and functions within the nonprofit organization, including:

  • Funding—In an ever-increasingly competitive environment, the ability to measure, monitor, and report the metrics that demonstrate success can encourage new and additional funding from donors, foundations, and other benefactors. For example, demonstrating achievement of your key milestones can unlock subsequent rounds of multi-year grants.
  • Accountability—Donors are increasingly tying their support to strict accountability. They want to see where their funds are going and the results that are achieved–whether it’s organizational growth and new locations or more nonprofit partnerships and matching funds. Nonprofits must provide increased transparency into the organization’s outcome metrics, controls, and reporting.
  • Stewardship—From development and accounting to operations and programming, the ability to track and report outcome measures–showing where you are and where you want to go—will help ensure good nonprofit financial stewardship. This, in turn, will boost donor confidence and strengthen your credibility—which supports your growth and your resources to pursue your mission.
Topics: Not-for-profit Industry Faith-Based not-for-profit Metrics