What are the key project accounting metrics and indicators for nonprofits?

1 Budget variance

Budget variance is the difference between the actual and planned amounts of income or expenses for a project. It can be calculated for each line item, category, or the whole project. Budget variance can help you identify and address any deviations from your original plan, and adjust your forecasts and actions accordingly. A positive budget variance means that you have more income or less expenses than expected, while a negative budget variance means the opposite. You should aim to keep your budget variance within a reasonable range, and explain any significant or recurring variances to your stakeholders.

2 Burn rate

Burn rate is the rate at which a project consumes its available funds over a period of time. It can be expressed as a percentage, a ratio, or an amount per month or week. Burn rate can help you measure the efficiency and sustainability of your project, and estimate how long your funds will last. A high burn rate means that you are spending your funds faster than expected, while a low burn rate means the opposite. You should monitor your burn rate regularly, and compare it with your budget and timeline, to ensure that you have enough funds to complete your project and deliver the expected outcomes.

3 Cost per outcome

Cost per outcome is the average amount of money spent to achieve a specific result or impact for a project. It can be calculated by dividing the total project cost by the number of outcomes achieved. Cost per outcome can help you evaluate the effectiveness and value of your project, and compare it with other projects or benchmarks. A low cost per outcome means that you are spending less money to achieve more results, while a high cost per outcome means the opposite. You should define your outcomes clearly, and collect and report the data accurately, to calculate and communicate your cost per outcome.

4 Revenue recognition

Revenue recognition is the process of recording the income earned from a project in the accounting period when it is earned, rather than when it is received. It can be based on different methods, such as accrual, cash, or percentage of completion. Revenue recognition can help you match your income and expenses for a project, and reflect the true financial performance of your project. It can also help you comply with the accounting standards and requirements of your funders and regulators. You should choose the appropriate revenue recognition method for your project, and follow the rules and principles consistently.

5 Project profitability

Project profitability is the difference between the total income and expenses of a project. It can be expressed as a percentage, a ratio, or an amount. Project profitability can help you assess the financial viability and success of your project, and determine whether it is worth continuing or replicating. It can also help you allocate your resources and prioritize your projects. A positive project profitability means that you are generating more income than expenses, while a negative project profitability means the opposite. You should calculate your project profitability periodically, and consider both the direct and indirect costs and revenues of your project.

6 Key performance indicators

Key performance indicators (KPIs) are measurable and specific indicators that reflect the progress and achievement of your project objectives and goals. They can be quantitative or qualitative, and can cover different aspects of your project, such as quality, timeliness, efficiency, effectiveness, or satisfaction. KPIs can help you monitor and evaluate your project performance, and report it to your funders and stakeholders. They can also help you identify and address any issues or risks that may affect your project. You should select and define your KPIs carefully, and align them with your project purpose and strategy.

7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?