Financial management might not be the most glamorous part of running a nonprofit, hence, many nonprofit leaders tend to overlook it. But it’s one of the most critical. A lot of nonprofits struggle with sustainability, not because they lack purpose or passion, but because they do not pay attention to their financial health. Prioritizing nonprofit financial health means treating financial management as mission work. When you understand your numbers, you lead with purpose, plan with foresight, and serve your community with strength.
In today’s podcast, Brooke Lively from Cathedral Capital and Stephen Halasnik from Financing Solution discuss the numbers all nonprofits always need to pay attention to.
Summary
Nonprofits and The Numbers To Pay Attention To
Generally, running a nonprofit is all about impact, but behind every great mission is a need to properly manage money. And while many nonprofit leaders are experts in storytelling, community engagement, or programming, the numbers can feel like a whole different language.
Remember, understanding your organization’s numbers is not just about compliance or bookkeeping. It’s about control, confidence, and sustainability. In other words, it’s the foundation of your nonprofit’s financial health.
Common Financial Struggles Facing Nonprofits
Nonprofits often face financial blind spots that threaten their stability. These challenges include:
- Overreliance on historical data instead of real-time metrics
- Cash flow uncertainty tied to donation and grant cycles
- Lack of financial forecasting and scenario planning
- Financial reports that confuse rather than clarify
One of the biggest takeaways? Financial health shouldn’t be reactive. Just like high-performing businesses, nonprofits need a proactive approach to budgeting, forecasting, and evaluating performance. Taking note of these numbers will help your nonprofit to be proactive and maintain strong financial health.
Why Financial Intelligence Matters for Nonprofit Success
Too often, nonprofits focus so intently on doing good that they forget to keep a close eye on the financial aspect of things. It is very easy to fall into the trap of just checking if there’s enough in the bank to make it through the month. However, that kind of reactive approach can lead to cash crunches, funding gaps, or even worse, burnout and shutdowns.
Being intentional with your financial management doesn’t mean becoming a spreadsheet wizard overnight. It starts with knowing what numbers matter most and how they can guide your decisions.
At this point, you may be wondering what these numbers are that your organization must pay attention to. Now, let’s walk through six key numbers every nonprofit should be tracking, and more importantly, why they matter.
The 6 Key Numbers That Define Nonprofit Financial Health
Let’s break them down, one by one.
1. Cash Flow Forecast
Cash flow is such an important number to pay attention to; Think of it like oxygen. You might have a strong budget, plenty of grants lined up, and a calendar full of events, but if you don’t have cash in the bank right now to pay your staff or cover rent, things can unravel quickly.
A 13-week cash flow forecast helps you predict how money will come in and go out over the next three months. This short-term, rolling view lets you spot trouble before it hits. For example, if you see that cash is likely to dip dangerously low in six weeks, you can plan a fundraising push or delay a purchase.
Having this forecast helps your nonprofit move from a place of constant reaction to proactive, calm decision-making, a key ingredient in long-term nonprofit financial health.
2. Budget vs. Actual
You probably have a budget. But are you using it as a living, breathing tool or just a document you created for your board and filed away?
Comparing your budget vs. actuals every month shows you how reality is stacking up against your plans. If you’re overspending in one area or underfunded in another, this report tells you right away, so you can adjust quickly.
It also keeps staff and leadership aligned, helping everyone understand the true cost of programs and operations. This kind of clarity supports smarter decisions and keeps financial surprises to a minimum.
3. Accounts Receivable
The truth is that many nonprofits don’t think they have accounts receivable, but you might be surprised.
Accounts receivable refers to money that’s owed to you. For Nonprofits, this could be:
- A grant you’ve been awarded but haven’t received yet
- Pledges from donors who committed funds but haven’t paid
- Reimbursements from partners or government agencies
So, tracking what’s coming in (and when) is essential for planning your spending. It also helps you follow up on overdue payments and avoid counting on money that’s still just a promise. Healthy receivables management gives you a clearer picture of available resources, which directly impacts your nonprofit’s financial health.
4. Accounts Payable
Now, you have to flip the coin. What do you owe? That is accounts payable.
Accounts payable include unpaid bills, outstanding invoices, and any other short-term liabilities. Managing this carefully helps you maintain trust with vendors, avoid late fees, and avoid accidentally double-paying someone.
When you have a clear handle on what you owe and when it’s due, you can better coordinate it with your cash flow. You might even spot opportunities to negotiate better terms or space out payments more strategically.
Strong management of both receivables and payables builds trust and helps prevent stressful financial surprises.
5. Gross Profit Margin (If Applicable)
The fact is that not every nonprofit will use this metric, but if your organization earns revenue through programs, ticket sales, merchandise, or other services, you need to know your gross profit margin.
This number tells you how much money you have left after covering the direct costs of delivering a program or service. For example, if you run a training program and charge participants a fee, you’ll want to know how much profit remains after paying trainers, materials, venue costs, etc.
Why does this matter? It matters because it helps you understand which programs are sustainable or even profitable, and which might need to be re-evaluated. It also supports smart decisions about scaling, pricing, or restructuring.
Gross margin analysis is an underrated but powerful way to strengthen nonprofit financial health when earned income is part of your model.
6. Productivity Ratios
Finally, let’s talk about time.
We all know that in mission-driven work, it’s not always easy to quantify impact. But you can often measure productivity, either in the form of clients served, workshops delivered, meals prepared, or outreach hours logged.
Productivity ratios track the relationship between time, people, and outcomes. For example:
- How many clients does a case manager serve each month?
- How many volunteer hours are needed to run a food distribution event?
- What’s the fundraising return per staff hour?
These ratios help you understand where your team’s energy is going and if that energy is aligned with your mission and strategy. Over time, they also help justify hiring decisions, manage workloads, and improve efficiency. And that’s key because nonprofit sustainability isn’t just about money, it’s about making the most of your limited time and talent, too.
Financial Reports Should Tell a Story
One common mistake is treating financial reports like data dumps, pages of numbers that no one actually understands. Good financial reports should tell a clear but simple story, like what’s working? What’s off-track? What decisions need to be made?
Using dashboards, charts, and trend lines can make reports much more digestible. Instead of drowning in data, nonprofit leaders can see what’s changing, where to focus, and how to act. This storytelling approach makes the numbers more accessible and invites your whole team into the conversation around nonprofit financial health.
From Confusion to Confidence
So many nonprofit leaders feel intimidated by financials, but the real power comes when you lean in, ask questions, and simplify.
You don’t have to become a CFO. You only have to know which numbers matter and use them to guide your decisions. That’s where true leadership happens. Financial clarity fuels confidence, and confidence drives better planning, stronger relationships, and greater mission impact.
Helping Nonprofit Leaders Navigate the Numbers
Most nonprofit leaders didn’t get into this work because they love spreadsheets. They’re visionaries, community builders, and problem-solvers. But when it comes to financial reports, it’s easy to feel overwhelmed or unsure.
However, the good news is that you don’t need to be a finance expert to take control of your numbers. You just need the right tools, a bit of guidance, and a willingness to learn. Once you start seeing how the numbers connect to your mission, it all begins to click. Again, you can employ the service of a financial strategy firm, offering CFO-level guidance that turns complex data into simple, actionable insights. Rather than just focusing on bookkeeping or accounting, outsourced CFOs help organizations build long-term financial sustainability.
Financial reports shouldn’t feel confusing or intimidating, they should help you tell the story of your organization’s health and future. It’s not about perfection. It’s about progress, clarity, and making informed decisions with confidence.
A Quick Note on Credit and Safety Nets
Sometimes, despite good planning, cash can get tight. In these cases, a line of credit can be a helpful bridge, but only when used strategically.
Therefore, you must remember that short-term borrowing should solve short-term timing issues, not fund ongoing overspending. When used with discipline, access to a line of credit can provide peace of mind and prevent panic. But it should never replace thoughtful budgeting, cash forecasting, or healthy reserves.
About Our Guest, Brooke Lively, From Cathedral Capital
Brooke Lively is a Chartered Financial Analyst and the founder of Cathedral Capital, a company that helps organizations turn financial chaos into clarity. With over 30 years of experience, she’s guided countless entrepreneurs and leaders across industries from law to nonprofits to build financially sustainable and scalable organizations. Brooke is the author of five books, including the international best-seller From Panic to Profit, and is widely recognized for her “6 Key Numbers” framework that helps leaders understand their finances and make confident decisions. She’s been featured in Forbes, Inc. Magazine, and CNBC, and has spoken at events across the country, including bar associations and women’s leadership conferences.
Learn About Stephen Halasnik
Stephen Halasnik is a Managing Partner at Financing Solutions, the largest provider of lines of credit to small nonprofits in 48 states since 2012. A line of credit is like an on-demand bridge loan for nonprofits when needed. Mr. Halasnik has hosted the popular Nonprofit MBA Podcast since 2018. The podcast brings experts together to discuss fundraising, nonprofit grants, executive director leadership, nonprofit boards, and other essential topics. You can learn more about the nonprofit line of credit program here.
