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Nonprofit Finance Glossary

K

Key Performance Indicator (KPI)

A measurable metric a nonprofit tracks over time to gauge financial health or program performance against its goals.

Financial KPIs for nonprofits typically include months of operating reserve on hand, the overhead ratio, budget variance by program, and days-cash-on-hand — numbers that give a board a fast read on financial health without requiring them to parse a full set of statements every meeting.

The best nonprofit KPI dashboards pair financial metrics with program metrics side by side: cost per client served next to number of clients served, so a board can see whether a program getting more efficient is also serving more people, or just spending less on the same number.

The trap to avoid is tracking KPIs that are easy to calculate but don’t actually predict anything useful — a single ratio like overhead percentage, watched in isolation, tells a board almost nothing about whether the mission is being advanced effectively.

See also: Variance Analysis, Overhead Ratio