KPI of the Week: Fundraising Efficiency Ratio

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A KPI for Not-for-Profit Organizations — The fundraising efficiency ratio is a KPI used by not-for-profit organizations to measure how efficient the organization is at raising money. The fundraising efficiency ratio formula is calculated by dividing the unrestricted contributions by the unrestricted fundraising expenses. The unrestricted contributions are the incomes from donors who do not specify where it must be used. The unrestricted fundraising expense is the money spent by the not-for-profit in order to collect the unrestricted contributions.

What Should Your Fundraising Efficiency Ratio Be?

Ideally, a not-for-profit organization should aim for a fundraising efficiency ratio greater than one. This means the organization is raising more money than it spends on fundraising efforts. The higher the ratio, the more efficient the organization is at fundraising. Tracking the fundraising efficiency ratio helps organizations assess the effectiveness of their fundraising strategies.

If the ratio is below one, it indicates that the organization is spending more on fundraising than it is receiving in donations. This could be acceptable if current efforts are expected to yield future donations. In such cases, it is best to calculate the fundraising efficiency ratio after the fundraising cycle has completed. Organizations should strive for a ratio greater than one to ensure sustainable and effective fundraising efforts.

By tracking an organization’s fundraising efficiency ratio, management can gauge whether or not the fundraising efforts are becoming more or less efficient. As the efforts become more efficient, management can note what is working and strive to replicate or improve on these methods. If the ratio starts to decline, this gives management the insight that the fundraising efforts need to be re-evaluated and plan a different course of action. Either way, the fundraising efficiency ratio provides valuable information that management can use in order to improve its fundraising capabilities.

Next Steps

Key performance indicators (KPIs) are essential for measuring and monitoring how well an organization meets its goals. By selecting KPIs that align with the strategic plan, not-for-profit organizations can ensure that all areas are working towards the same objectives. Regularly monitoring this KPI provides the insights needed to optimize fundraising strategies and achieve financial goals. For more information on selecting the best KPIs for your organization, contact Porte Brown. Our expertise can help you enhance your fundraising efficiently and overall operational success.

Benefits of Monitoring the Fundraising Efficiency Ratio

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