Financial Strategies for Non-Profit Organizations

Updated: Sep 28, 2020

First and foremost, thank you for all that you do to give back to our world. We love working with non-profit organizations, and we hope to work with you someday, too! Even when profit isn’t the goal, financial security still matters. Therefore, it’s still important to have a financial strategist on your team to help you use others’ generosity to the best use. You may have a mix of different income; perhaps you have a large amount of donors, a few donors who donate large amounts, service donations, or fundraising activities to generate funds. Whatever the case may be, it’s important to learn how to bookkeep to use the funds to best fulfill your nonprofit's mission! Today, we use our Adam Kae Way to outline some basics to get started on the goal to financial strategy. Questions? Just ask! Also, be sure to check out our FREE worksheet to start planning your non-profit financial strategy!

Step 1: Adam Kae Analysis

Let’s start by taking an open-minded look at your current financial practices. Here are a few questions to consider:

  • What are your current methods of keeping your books?

  • Do you use any software like QuickBooks or ZipBooks?

  • Do you have full-time employees, part-time employees, or volunteers?

  • What is your mixture of employees versus volunteers?

  • Is there someone you work with who knows financial strategy?

  • How much time/money is spent dedicated to bookkeeping methods?

  • How often do you prepare financial statements?

  • How do you share financial information with donors?

By answering these questions, you might start to find patterns or protocols you never before considered! But wait! We’re only on the first step. After answering these questions, also consider the industry you’re in, what kinds of environmental factors affect your organization, and what other similar non-profits exist in your area.

Get Your FREE Non-Profit Financial Strategy Worksheet HERE

Step 2: Activity Optimization

Categorizing Your Activities

Now that we have a bird’s eye view of how your company financially operates, we can start categorizing them by activity type. Take a look at your most recent financial statement or bookkeeping ledger. (Hint: If you don’t create these regularly, take a peek at your latest tax Form 990.) Divide your expenses into two categories: primary activities and support activities. Primary activities are all of the things you do as part of your non-profit mission. For example, if you provide luggage to foster children, a primary activity expense might be the cost of the car and gas to drop off the luggage at the child’s house. A support activity might be bookkeeping software, a paid marketing campaign, or a business consultant. We know that you want every last dollar to go directly toward your organization’s mission, but back-office work is just as important to make sure operations run smoothly!

Naming Your Resources

Next, take a look at the resources available to you. Do you have assets like trucks, supplies, or food that can be donated? Can you create partnerships with schools or churches? Your organization is a great way to bring the community together! By taking the time to develop relationships, you can gain more resources toward your cause.

Lessening Costs and Increasing Returns on Investment

Of course, you can always look at where expenses can lessen. Maybe it’s as simple as cutting down from two drivers to one or finding a new vendor for supplies. On the flipside, look at where you can use net income to gain returns on investments. Could you implement a digital advertising campaign to raise awareness for your organization? Could you professionally update your website to provide more information about your cause? Is there any technology or business consultant help that could ultimately benefit your bottom line? The old adage “you have to spend money to make money” is only true if you’re investing your money in the right places.

Calculate Important Ratios

This is a great time to take a look at your bookkeeping ratios. Here are a view key ones to calculate:

Viability Ratio

The viability ratio compares your net assets to your long-term debt. It’s a great tool to measure your liquidity and overall ability to meet financial obligations. You’ll ideally want this to be greater than 1.

Viability Ratio = Net Assets / Long-Term Debt

Current Ratio

The current ratio compares your current assets and liabilities to look at your short-term financials. You’ll want this to ideally be greater than 1.

Current Ratio = Current Assets / Current Liability

Operating Margin

The operating margin helps you see what surplus your organization has left over after expenses. You can also use this to find where to do more investment planning!

Operating Margin = (Revenues - Expenses) / Revenues

Program Efficiency

The program efficiency ratio is great to show funders how much you spend toward your mission. It measures your service expenses (aka Primary Activities) against your total expenses.

Program Efficiency = Service Expenses/Total Expenses

Fundraising Efficiency

Lastly, fundraising efficiency allows you to see how your fundraising efforts pay off! Based on this ratio, you can reevaluate how much you spend toward fundraising or how often you host fundraising events. Experiences like fundraising events cost money, but it’s important to understand the return on investment. Keep in mind this may not just be fiscal, either! Your events are a great way to raise awareness for your cause, so this ratio will help ensure your marketing and financial strategies are working in tandem.

Fundraising Efficiency = Amount of Contributions / Fundraising Expenses

Get Your FREE Non-Profit Financial Strategy Worksheet HERE

Step 3: Advancements & Enhancements

Now that you’ve picked through your activities and finances with a fine-toothed comb, where do you see room for improvement? Improving your financial ratios is a great place to start, and a great financial strategy may help you gain larger donations over time.

Your improvement areas don’t always have to include sweeping changes, either. They can be as simple as improving protocols to be more efficient. Cash flow can be a bit tricky, especially with seasonal or volatile organizations, but better bookkeeping can help you find those trends and plan accordingly. Adam Kae & Associates can help you find the best financial strategies that will help you put more of your money toward your mission.

Get Your FREE Non-Profit Financial Strategy Worksheet HERE

Step 4: Assemble Your Strategy

Once you’ve found where you want to improve, organize it into a plan. Make sure each of your improvements are measurable, actionable, and have time limits. One example could be “improve fundraising efficiency ratio by 10% in the next six months through X, Y, Z” Give yourself goals, and challenge your team to help you complete them!

If you haven’t already, now is the time to also implement creating financial statements regularly. These include income statements, balance sheets, and cash flow statements.

This is also the time to look ahead and start capital expenditure planning. What are your future goals for your organization? What steps can you take now to start making those goals reality?

Get Your FREE Non-Profit Financial Strategy Worksheet HERE

Step 5: Activate Your Adam Kae Way

You’ve done all the work, now show it off! Present your plan to your organization leaders, lenders, and more! As a non-profit, donors love transparency and up-to-date information. Post your plan on your website or share it in your newsletter. Your stakeholders will see that you’re planning toward the future, it will inspire them to work harder than ever to continue your mission and fight for your cause!

Get Your FREE Non-Profit Financial Strategy Worksheet HERE


What’s your Adam Kae Way? We’ve included this FREE worksheet to start your journey toward commanding your finances and leveling up your organization! We’ll also include a FREE 30-Minute 1-on-1 Consultation on your #1 biggest financial concern (sign up HERE)

AKW Nonprofit Summary Worksheet
Download PDF • 181KB


Financial Strategies for Nonprofit Organizations

Nine Ratios to Help Measure Your Not-for-Profit's Financial Health (article)

Follow Us:

Facebook: Adam Kae & Associates

Instagram: AdamKae_CFO

LinkedIn: Adam Kae & Associates

Disclaimer: This article contains information and opinions from Adam Kae & Associates, and the information and opinions should not necessarily be seen as the best possible solutions for your business. Please contact us at to help you find the best solutions for your business.

23 views0 comments