In the not-for-profit sector, the fundraising efficiency ratio is a key performance indicator (KPI) that measures how effectively an organization raises funds. This ratio is calculated by dividing the unrestricted contributions by the unrestricted fundraising expenses. Unrestricted contributions are donations with no specific use designated by the donor, while unrestricted fundraising expenses are the costs incurred to collect these contributions.
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.
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.
Get in touch today and find out how we can help you meet your objectives.
