Do your financial ratios show donors you are making an impact?

Financial ratios aren’t just numbers—they reflect your organization’s health and efficiency. Sharing your story of financial health with donors and other stakeholders objectively via benchmarked financial ratios boosts donor confidence and trust. However, calculating these ratios accurately requires precise financial reporting, which can be challenging without the right in-house expertise or time. 

 Here are some ratios that can help build trust with donors: 

1. Program Expense Ratio – High program expense ratios indicate that a larger portion of donations is being used for the organization’s mission, which can enhance donor confidence. 

2. Liabilities to Assets Ratio – A lower ratio suggests better financial health and sustainability, reassuring donors about the organization’s long-term viability. 

3. Fundraising Efficiency Ratio – What does it cost per dollar that you fundraise? Lower costs per dollar raised indicate more effective use of resources, which is appealing to donors. 

4. Working Capital Ratio – By comparing current assets to current liabilities, this ratio shows if what you need to pay out in a period exceeds what is available to pay during that time. A healthy ratio indicates financial stability which is crucial for maintaining donor trust. 

Are you a church or nonprofit for whom public charity ratings don't apply?  The principles in this series still apply.  Your contributors and stakeholders are interested in your sustainability and stewardship of resources and actually have limited ways to access relevant information if you don't supply it.

By monitoring and optimizing these ratios, your organization can demonstrate financial responsibility and transparency, thereby building stronger trust with donors. These ratios are evaluated by charity rating agencies like Charity Navigator and are necessary for a strong rating in the Financial & Accountability area.  

Don’t let suboptimal financial ratios limit your charity’s potential.

At Missionwell, we have the experience to assist you, based on many years of tuning up and publishing accurate nonprofit financial statements, allowing accurate financial analysis. 

If you have concerns over why your charity ratings are not as strong as they should be, Missionwell’s Stars for Stars assessment will yield robust recommendations and a road map to improved charity ratings for your organization across multiple areas. And if you already know your financial reporting and analysis needs help, you can add Accounting and Financial Reporting Services as an add-on to your Stars for Stars assessment. 

 Get Started Today 

1. If you missed our latest articles on how your financial statements could be holding back your fundraising, or how having a clear vision and mission can boost your charity ratings, check them out here and here. 

2. Try Missionwell’s free charity transparency self-assessment for further ideas for improving your public charity ratings. 

3. Request a quote for your Stars for Stars assessment and start improving your ratings. 

Shape your financial destiny while getting the stars and seals you deserve from Charity Navigator and Candid (GuideStar) with our Stars for Stars assessment. 

This is article 3 of 6 in our series on improving public charity ratings to increase fundraising.