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By Ben Dennison, CPA - Staff Accountant

Key performance indicators, or KPIs, are quantifiable indicators of a not-for-profit organization's (NPO) success. KPIs should be used as a measure of the NPO's organizational mission and used to measure both short-term and long-term organizational success.

Determining what KPIs are relevant for a NPO can be challenging, particularly when that entity isn't a part of a larger organization. Those actively engaged in the NPO community should learn to use KPIs to their organization's advantage, specifically when benchmarking, and also follow three general principles when selecting KPIs for their NPOs.

NPOs should be aware of three general principles, when selecting KPIs:

  1. Stick to one definition or calculation for a KPI,
  1. Set a target for the year and
  1. Use industry benchmarks

In sticking to one definition or calculation for a KPI, organizations need to be sure to isolate one variable to measure period to period. Be sure to keep the factor being measured isolated so that it can truly be measured.

In setting a target for the year, organizations need to set targets over a measurable period and follow-up on results monthly to not only track progress but to usher in accountability organization-wide.

Finally, while using industry benchmarks NPOs should be comparing their organization to others in the communities and industries in which they operate. This will let the organization know how they compare against others and find areas in which improvements may need to be made.

Source: AICPA Insights


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