Guest post by: Greg McRay 

Imagine you receive this text from an organization you support: “Thanks to your help, we were able to feed hungry families in the community this year!”

Now, imagine the organization gets a little more specific: “Over the past year, your support helped us feed 2,500 hungry families in the community. That’s 20% more meals served than ever before, all thanks to the generosity of donors like you!”

For most, a story of impact without a single number to back it up falls flat. A story supplemented by irrefutable facts, on the other hand, is more compelling.

From your constituent relationship management system (CRM) to marketing analytics tools, every activity your nonprofit undertakes generates data that can inform future outreach. However, nonprofits often overlook a key source for this data: your organization’s finances.

Bridging the gap between your nonprofit’s passionate narrative and financial reality is essential for building trust and cultivating committed donors. Let’s take a closer look at the steps your team can take to tell a story backed by accurate financial data.

Maintain Accurate Financial Records

Financial data is only a valuable addition to your storytelling if it’s accurate. Erroneous or messy books translate directly into unreliable numbers for your storytelling, which can undermine donor trust. 

Reliable financial data is built on effective bookkeeping practices. Foundation Group’s bookkeeping guide explains it this way: “When the time comes to report your financial activity or make a budgetary decision, you’ll be equipped with precise and thorough information.”

The guide goes on to offer a few steps for establishing strong bookkeeping practices:

1. Work with a professional bookkeeper. Rather than adding bookkeeping to your staff’s plate, consult a bookkeeper with experience in nonprofit finances for professional guidance.
2. Record every transaction. Maintain detailed financial records, using dedicated bookkeeping software to automatically track funds and expenses.
3. Reconcile bank statements. Regularly check financial records against bank statements to identify and correct any discrepancies.
4. Create a budget. Develop a financial plan to show donors your future goals. Using the example from earlier, a nonprofit might share that it’s budgeting for another 10% increase in meals delivered next year.
5. Fill out financial statements. Summarize your organization’s fundraising and spending activities, and use insights from these reports to share general financial details with donors.

A strong bookkeeping approach sets the stage for data-backed storytelling, giving you a solid foundation upon which you’ll build your narrative. With accurate and focused data, you can reassure donors that their support is truly making a difference.

Track Expenses by Program

With your records in order, it’s time to translate financial figures into specific stories. Just as you likely let engagement trends and other key metrics inform your fundraising plan, making the connection between financial data and your storytelling campaign involves reviewing the context surrounding each transaction.

Contextualizing financial data requires tracking expenses not just by what was purchased but by why it was purchased. For example, consider the following categories: 

• Program expenses: Create subcategories for each program. You might record “art supplies, $250” under “Youth Mentorship Program,” and “craft materials, $100” under “Senior Outreach Program.”
• Marketing and engagement efforts: Detail the exact marketing or engagement initiative for which you’re purchasing materials. If you’re hosting an event, you may have separate initiatives for inviting attendees and following up afterward.
• Staff compensation: Break down staffing expenses by their purpose. One group might be labeled “Staff Development,” under which you record “Grant Writing Workshop” and “Conferences.”

Keeping your records as detailed as possible also helps you identify the information that’s most important to share with donors. For example, an increase in overhead expenses may seem concerning at first glance. However, sharing the context that your annual insurance premium renewal caused this one-time spike will put donors at ease.

Align Financials with Impact Metrics

Think of your financial data as the lead-up to your impact. Impact metrics explain what happened, and your finances explain how you got there.

According to UpMetrics, measuring your social impact involves considering every effect your organization has on its community, whether that be positive or negative, intentional or unintentional. Linking these impacts to your financial activity creates an evidence-based story of return on investment for your donors.

Here are some metrics that naturally combine finances and impact, making them great starting points for your storytelling:

• Cost per outcome: How much does it cost your nonprofit to achieve a specific outcome?
  • Example: “For every $100 donated to our literacy program, we successfully moved one child reading below grade level up to their target level.”
• Program expense ratio: What percentage of total expenses is directly allocated to program services?
  • Example: “90% of all donations go directly to our literacy program, which provides tutoring services to 100 underserved schools each year, on average.”
• Volunteer hour valuation: How many hours did volunteers contribute to your programs, and what was the monetary value of their time?
  • Example: “Our dedicated volunteers contributed over 1,000 hours last year, offering 35% more tutoring time than in prior years.”

You can also use this overlap between finances and impact to tailor your stories to specific audiences. For example, major donors giving to specific programs will want updates related to that program’s impact. Even donor information stored in your CRM, like demographics or employment data, can offer insight into which metrics a segment will care about most.

Prioritize Timely and Accurate Form 990 Filing

Beyond the risk of having your 501(c)(3) status revoked, proper Form 990 filing is essential for many reasons. While the form may not be front and center on your nonprofit’s website, the IRS does require your organization to make it publicly available. Also, it’s one of the first places foundations and other stakeholders look to understand your financial health and efficiency. 

Citing Form 990 in your storytelling efforts can resemble references to external studies or educational resources, instilling even more trust in your audience. Let’s take a look at an example:

In the last fiscal year, we saw a dramatic 25% increase in the number of meals distributed—a direct result of expanding our local food recovery partnerships. However, achieving this growth while maintaining fiscal responsibility was crucial. 

As our latest Form 990 (Part IX, Statement of Functional Expenses) shows, we successfully channeled 92% of our total expenses directly into Program Service Expenses. This massive percentage encompasses everything essential to getting food on the table, including the costs of refrigeration, transportation to local shelters, and specialized staff dedicated to nutritional counseling.

Much like your bookkeeping data, accurately completing and filing Form 990 is critical before openly referencing this document. 

The most effective nonprofit storytelling is a blend of passion and proof. By transforming raw financial figures into compelling evidence of your impact, you’re not just asking for a donation; you’re inviting a donor to invest in a verifiable, successful mission.