As another fiscal year wraps up, your nonprofit may find itself buried in reports, reconciliations, and audits. But FYE data is more than just something for your auditors or board to review; it’s a valuable tool for driving strategic growth and ensuring sustainability.
Let’s take a closer look at what your data can reveal and how you can put it to work for your nonprofit’s future.
Your Revenue Streams: Stable, Shrinking, or Shifting?
What to Look For:
Start by comparing revenue year-over-year by categories such as grants, donations, events, and earned income. Are there any noticeable increases, declines, or shifts? Categorizing revenue makes it easier to spot trends, plan for the future, and ensure your reporting stays clear and audit ready.
What It’s Telling You:
If your organization relies heavily on one type of funding, it may be time to take a closer look. Just like a well-balanced investment portfolio, a diversified revenue mix can help protect your nonprofit from unexpected changes, whereas a single-source dependency can leave your organization vulnerable. Consider this an opportunity to bring your team together, think creatively, and explore new potential income streams.
What to Do:
- Determine which programs generated the most revenue last year. These are the areas donors and grantors are most willing to fund. Focus on expanding those initiatives and consider scaling back programs that consistently struggle to attract funding.
- Be mindful of the sunk-cost fallacy (the tendency to continue investing in a program simply because you’ve already devoted significant time or money). In today’s evolving environment, flexibility is essential. Staying nimble and open to change can help you adapt and thrive.
- Phase out underperforming programs. This will free up staff time and resources to invest in revenue diversification. Avoid launching multiple new initiatives in the same fiscal year. Introduce new efforts in a carefully planned sequence, monitor their performance closely, and be willing to pivot (or stop altogether) if something isn’t working.
- Finally, make it as easy as possible for donors to contribute. Even small changes (like offering additional payment methods) can make a big difference. One organization we work with saw a significant increase in contributions simply by adding a popular payment app to their donation options.
*Important Note: If you do decide to add popular payment apps such as Venmo or Zelle, be sure to consult with your auditor beforehand. While these platforms offer convenience, they may also introduce internal control risks or fail to meet audit standards. In some cases, using these methods without proper oversight could raise concerns during an audit or even lead to a management letter comment. Always confirm that any new payment option aligns with your organization’s financial controls and compliance requirements.
Expenses: Aligned with Mission or Drifting?
What to Look For:
Start by reviewing your functional expense breakdown focusing on the amount allocated to programs compared to administrative and fundraising expenses.
Pay attention to any significant differences between budgeted and actual expenses.
What It’s Telling You:
Your spending should reflect your mission. Donors and grantors often look at the percentage of your expenses dedicated to program services versus overhead. If your program expenses are low, it may signal that administrative or fundraising costs have gradually increased beyond what’s reasonable.
What to Do:
- If less than 70-75% of your total expenses are going toward programs, it is time to reevaluate your budget. Redirect resources toward mission-critical work to ensure your financial decisions are aligned with your strategic goals.
- Build a thoughtful, mission-driven budget. Budget-to-actual variances that are consistently significant can indicate a drift from your organization’s mission. Reviewing variance reports each month helps you stay on track and make timely adjustments. Professional athletes do not wait until the end of a season to review how well they played. If they did, the season would be over and it would be too late to make corrections and improve performance. An organization’s budget-to-actual report is the same. Review it monthly and you can change your “plays” to end with a winning season. Review it only at year end and you’re stuck with the performance you had with no opportunity to improve.
- This is also a good time to reassess vendor contracts, staffing needs, and operational efficiency. For example, shopping around for new insurance carriers or office supply vendors can lead to meaningful savings. It’s also worth revisiting your technology because many modern systems are more affordable than ever and can dramatically improve efficiency. Intuitive platforms may allow your team to automate routine tasks and refocus efforts on programmatic activities that advance your mission.
Program Effectiveness: Are You Measuring Impact or Just Activity?
What to Look For:
Evaluate your cost per outcome or cost per participant. The focus today is increasingly on outcomes (what’s being achieved) rather than simply on activity levels.
What It’s Telling You:
Calculating the cost per outcome helps determine whether your programs are making a measurable difference. If the impact isn’t clear, it’s time to ask why. What barriers are in the way, and what changes could lead to better results?
This metric also sheds light on how efficiently you use resources. If a program isn’t delivering real impact, those dollars may be better invested elsewhere.
What to Do:
- Consider sunsetting or restructuring programs that are no longer delivering results. Let the data guide your decisions.
- At the same time, use your numbers to tell your story. Demonstrating your impact through clear, outcome-focused data is a powerful way to engage funders, stakeholders, and your broader community. When your results align with your mission, you create a compelling narrative that supports growth and long-term sustainability.
Cash Flow & Reserves: Can You Weather a Storm?
What to Look For:
Monitor the number of months of cash you have; this figure reflects your ability to handle financial disruptions.
What It’s Telling You:
This information shows whether your organization has a financial cushion, much like the emergency savings we strive for in our personal lives. A strong financial cushion allows your organization to remain steady through unexpected challenges.
Such a cushion also indicates your ability to manage cash flow gaps, especially when dealing with cost-reimbursement grants. These grants often require you to spend funds up front and wait weeks or months for reimbursement. Without reserves, bridging that gap can be challenging.
What to Do:
- Set a clear goal for your operating reserves. A common benchmark is three to six months of average expenses. For example, if your monthly expenses average $20,000, aim for $60,000 to $120,000 in reserves.
- Include reserve building in your annual budget planning. The most effective way to do this is by budgeting for a modest surplus. While the term “profit” may sound out of place in the nonprofit world, generating a surplus is both permissible and essential to financial health.
- Finally, implement regular cash flow projections. These allow you to anticipate shortfalls well in advance. If projections show that cash will be tight in June, for example, you’ll have the lead time needed to postpone expenses, adjust plans, or secure temporary support. When done consistently, cash flow projections are one of the most effective tools for maintaining stability.
Donor Retention: Are You Keeping the Supporters You Earned?
What to Look For:
Take a close look at your donor retention rates, especially for first-time and recurring donors. Are new supporters sticking around? Are long-time contributors continuing to give year over year?
It’s also important to analyze your lapsed donors. Who hasn’t given recently, and when was the last time they were engaged? These insights can reveal opportunities to re-engage your base and strengthen relationships with your supporters.
What It’s Telling You:
Your donor retention data offers more than just numbers. It tells a story. High retention rates suggest that your messaging is hitting the mark and that donors feel connected to your mission.
If supporters are consistently giving year after year, it’s a strong sign they see value in the work you’re doing. A drop in retention, however, could indicate it’s time to revisit how you’re communicating impact or engaging with your community.
What to Do:
- Prioritize donor stewardship year-round. Building strong relationships shouldn’t stop after a gift is received. Keep supporters engaged by checking in regularly, sharing updates, and showing appreciation beyond just fundraising requests.
- Automate thank-you notes, updates, and engagement emails. Use technology to ensure timely, personalized communication with donors. Automations can help you consistently acknowledge gifts, share impact stories, and invite continued involvement, even when your team is busy.
- Reconnect with lapsed donors. Sometimes, all it takes is simply to reach out and ask them to reengage. Review your lapsed donor list regularly and reach out with a sincere message. Sometimes all it takes is a personal note or a reminder of the impact they once helped create to inspire renewed support.
Audit and Compliance Flags: Are You Staying in Good Standing?
What to Look For:
Carefully review your most recent financial audit report for any adjustments, findings, or concerns raised by auditors. Communication around issues such as weaknesses in internal controls, compliance, or other flagged areas might require attention. These audit flags often point to underlying risks or gaps in your financial management processes.
Additionally, monitor whether your nonprofit has any late filings for required reports, including IRS Form 990 or state compliance documents. Repeated delays or missed deadlines not only can hurt your organization’s reputation but also jeopardize its good standing with regulatory agencies. Staying on top of these audit and compliance details is critical to maintaining trust with funders, regulators, and your community.
What It’s Telling You:
This data reveals whether your internal controls and reporting systems are strong. Audit findings often point to areas where internal processes could be improved.
It also tells you whether your financial infrastructure is keeping pace with your organization’s growth. As teams get busy, it’s easy to fall back on “the way we’ve always done it.” But growth often demands new systems and smarter workflows.
What to Do:
- Address audit findings promptly with documented remediation steps. Auditors want to see a clear, timely response to prior-year findings, including any updates to internal controls or procedural changes. Modern technology often offers built-in safeguards, for instance, bill pay systems that require multi-level approvals can significantly reduce the risk of human error.
- Update policies, procedures, and staff training to reflect any process changes. Change is hard, but the sustainability of the organization matters more than convenience. Give your team time to adjust, be patient, and it will pay off.
- Consider outsourced accounting. Nonprofit accounting has unique demands, and outsourcing can often be more cost-effective than hiring in-house. Outsourcing also brings built-in internal controls. Just be sure to work with a firm that specializes in nonprofit accounting to get the full benefit including accuracy, compliance, and strategic insight.
Closing Thought: Your FYE Data Is a Mirror and a Map
Fiscal year-end data gives you a moment of clarity like a mirror reflecting where you’ve been and a map pointing to where you can go. Don’t just file it away. Use it to lead with intention, allocate resources wisely, and deepen your impact.
If managing and interpreting this data feels overwhelming, we at Chazin specialize in helping nonprofits like yours turn complex financial information into clear insights and actionable strategies. Together, we can make sure your numbers aren’t just sitting on a page but actively guiding your mission forward.
The numbers speak. Make sure you’re listening.
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Chazin
With over 20 years working exclusively with nonprofits, we pride ourselves in having a unique understanding of nonprofit accounting needs. We believe that nonprofits deserve personalized, quality service and should not settle for a one-size-fits-all approach. We collaborate with you to provide a fully virtual and customized solution that is not only cost-effective but also strengthens your accounting function. We offer a team of industry experts at your disposal to provide advice, leading technology, and to supplement existing staff to improve efficiency and compliance.