How to Use KPIs to Grow Your Business Sustainably
Every business owner wants growth—but not all growth is healthy. Expanding too quickly without clear financial insight can stretch cash flow, overwhelm your team, and put your organization at risk. That’s where Key Performance Indicators (KPIs) come in.
KPIs are measurable values that help you track performance, spot trends, and make smarter decisions. When you focus on the right KPIs, you gain visibility into whether your growth is truly sustainable.
What Are KPIs?
KPIs are specific, quantifiable metrics that reflect how well your business is performing. They provide real-time insights into financial health, operational efficiency, and strategic progress.
Unlike general reports, KPIs are designed to answer one question: Are we moving toward our goals in a healthy way?
Essential Financial KPIs for Sustainable Growth
1. Revenue Growth Rate
Tracks how fast your sales or income are increasing. Steady growth is healthy; rapid spikes may indicate overextension.
2. Gross Profit Margin
Shows how much money is left after direct costs. Shrinking margins may signal rising costs or pricing issues.
3. Operating Cash Flow
Cash is king. This KPI shows whether your business generates enough cash to cover expenses without relying on loans or credit.
4. Current Ratio
Measures liquidity (current assets ÷ current liabilities). A ratio above 1.0 means you can cover short-term obligations—key for sustainability.
5. Customer Acquisition Cost (CAC) vs. Customer Lifetime Value (CLV)
If it costs more to gain a customer than the revenue they bring over time, growth isn’t sustainable. This balance matters for both nonprofits and for-profits.
6. Employee Productivity (Revenue per Employee)
Too much growth without efficiency can overwhelm your team. This KPI ensures productivity scales with expansion.
How to Use KPIs Effectively
Choose the right KPIs
Don’t track everything. Select 5–7 KPIs tied to your goals.Set realistic benchmarks
Compare results against industry standards or past performance.Review regularly
Monthly or quarterly KPI reviews prevent surprises and help adjust strategy.Visualize your data
Dashboards make KPIs easy to understand and act on.Align your team
Share KPIs with leadership or staff so everyone understands what success looks like.
✅ Final Takeaway
KPIs aren’t just numbers—they’re guideposts. By tracking the right indicators, you’ll know whether your growth is sustainable, profitable, and aligned with your long-term vision.
Don’t just grow. Grow smart.
Need help identifying or setting up KPIs for your business or nonprofit? I work with organizations to create customized dashboards that turn financial data into decisions.
📧 info@dmgaccounting.com | 🌐 dmgaccounting.com
How to Track Restricted vs. Unrestricted Funds in a Nonprofit
For nonprofits, not all dollars are created equal. Some donations and grants come with specific rules for how they can be spent—others can be used more freely. Understanding the difference between restricted and unrestricted funds (and tracking them properly) is essential for transparency, compliance, and trust with donors.
What Are Restricted Funds?
Restricted funds are donations or grants given with conditions or limitations. The donor specifies how the money must be used.
Examples:
A foundation grant restricted to funding a food pantry program
A donation earmarked for scholarships
A capital campaign gift restricted to building renovations
You cannot use restricted funds for general operating costs or programs outside of the donor’s intent.
What Are Unrestricted Funds?
Unrestricted funds are flexible dollars that your organization can use where they’re needed most.
Examples:
General donations without donor stipulations
Membership dues
Program service fees
These funds often cover vital needs like payroll, rent, or technology—expenses that keep the organization running but are less exciting to donors.
Why Tracking Matters
Failing to track funds properly can create serious issues:
Loss of donor trust if money is misused
Compliance issues during audits or grant reviews
Inaccurate financial statements that confuse your board and funders
Accurate tracking ensures you honor donor intent and maintain credibility.
How to Track Restricted vs. Unrestricted Funds
1. Use Fund Accounting in Your Chart of Accounts
Set up accounts that clearly separate restricted and unrestricted funds. Nonprofit accounting software like QuickBooks Online (nonprofit edition), Aplos, or Sage Intacct can help.
2. Label Donations at the Point of Entry
As soon as a gift is received, flag whether it’s restricted or unrestricted. Don’t wait until year-end.
3. Reconcile Regularly
Run monthly reports to ensure restricted funds are being spent according to donor intent and balances are correct.
4. Report to Donors Transparently
Show donors how their restricted gifts were used. This builds trust and increases the likelihood of future giving.
5. Train Your Team
Make sure staff and board members understand the difference between restricted and unrestricted funds—so spending decisions are made correctly.
Final Takeaway
Nonprofits thrive on trust, and one of the best ways to build it is through clear, responsible fund tracking. When you honor donor intent and keep your reporting transparent, you not only stay compliant—you strengthen your mission’s credibility.
Need help setting up or cleaning up your restricted fund tracking? I work with nonprofits to build systems that make it simple and audit-ready.
📧 info@dmgaccounting.com | 🌐 dmgaccounting.com
How to Read a Profit & Loss Statement in 10 Minutes
A Profit & Loss Statement (also called an Income Statement or Statement of Activity for nonprofits) is one of the most powerful tools you have as a business owner or nonprofit leader. But let’s be honest—many leaders glance at it, feel overwhelmed, and move on.
The good news? You can learn to read a P&L in 10 minutes or less. Here’s how:
1. Start With Revenue
This is the top line—the total money your organization brought in.
For businesses: product sales, service revenue, contracts.
For nonprofits: donations, grants, program income.
Ask: Are revenues trending up or down? Are they aligned with expectations?
2. Look at Cost of Goods Sold (COGS) or Direct Program Costs
This section shows the expenses directly tied to delivering your product or service. For nonprofits, it may reflect direct program expenses.
Ask: How much does it cost to deliver what we do? Is that sustainable?
3. Check Gross Margin
Gross Margin = Revenue – COGS
This tells you how much money is left after covering direct costs. A shrinking margin may mean rising costs, pricing issues, or inefficiencies.
4. Review Operating Expenses
These are your overhead costs: salaries, rent, marketing, insurance, technology, etc.
For nonprofits: admin + fundraising expenses.
Ask: Are operating expenses aligned with revenue growth?
5. See the Operating Income (or Loss)
This is the bottom line before taxes or non-operating items. It shows if the core of your business is profitable—or if your nonprofit is running in the black.
6. Don’t Ignore the Net Income
Net Income (the “bottom line”) = what’s left over. Positive means profit; negative means loss. For nonprofits, this is your surplus or deficit.
Ask: Do we have enough cushion to reinvest in growth or sustain our mission?
7. Compare Over Time
A single P&L is just a snapshot. Compare month-to-month or year-to-year to see trends. This is where insights really happen.
✅ Final Takeaway
A Profit & Loss Statement isn’t just an accounting report—it’s a story of how your money is being earned and spent.
When you know how to read it quickly, you gain the clarity to make smart, confident decisions.
Need help turning your P&L into insights? That’s what I do.
📧 info@dmgaccounting.com | 🌐 dmgaccounting.com
How to Keep Your Small Business Books Audit-Ready
Even if your small business isn’t legally required to have an audit, lenders, investors, and potential buyers may ask for audited financials. Keeping your books audit-ready saves stress and builds credibility.
1. Separate Business and Personal Finances
This is the #1 audit red flag. Use a dedicated business bank account and credit card—no exceptions.
2. Reconcile Accounts Monthly
Bank and credit card reconciliations catch errors early. Make this part of your monthly close process.
3. Keep Detailed Records
Every expense should have documentation—receipts, invoices, contracts, or purchase orders. Store them digitally for easy access.
4. Follow GAAP Standards
Auditors expect GAAP compliance: accrual-based accounting, consistent expense categorization, and proper asset depreciation.
5. Strengthen Internal Controls
Separate financial duties where possible. For example, the person issuing payments shouldn’t also reconcile accounts.
6. Invest in the Right Tools
Accounting software like QuickBooks Online or Xero automates reconciliations, generates reports, and maintains audit trails auditors value.
7. Plan Ahead for Taxes
Work with a tax advisor or CFO to ensure your books tie directly into your tax return—saving time and avoiding red flags with the IRS.
✅ The Bottom Line: Audit-ready books protect your reputation, improve lender and investor confidence, and give you financial clarity.
Pro tip: Even without an annual audit, treating your books as if you’ll be audited builds discipline—and makes growth smoother.
How to Keep Your Nonprofit’s Books Audit-Ready
Nonprofits have an added layer of financial responsibility—every dollar is tied to trust. Whether your organization faces a required audit, a grantor review, or board-level scrutiny, keeping your books audit-ready isn’t just about compliance—it’s about credibility.
1. Document Everything
Keep supporting documents for every transaction: receipts, grant agreements, donor letters, invoices, and contracts. Many funders want proof of how funds were used. A digital filing system makes this easier.
2. Track Restricted vs. Unrestricted Funds
One of the biggest red flags in nonprofit audits is mishandling restricted funds. Be diligent in tracking donations designated for programs vs. general operations.
3. Reconcile Monthly
Don’t wait until year-end. Reconciling bank accounts, credit cards, and petty cash each month ensures your financials are always accurate.
4. Maintain Strong Internal Controls
Segregate duties where possible (e.g., the person who writes checks shouldn’t also reconcile accounts). Require dual signatures for larger disbursements and board oversight.
5. Use Nonprofit-Friendly Software
QuickBooks Online (nonprofit version), Aplos, or Sage Intacct produce the specialized reports auditors expect, like Statement of Activities and Functional Expenses.
6. Prepare Your Board
Your board has fiduciary responsibility. Share regular financial reports so they’re comfortable asking questions. Transparency avoids tough conversations later.
✅ The Bottom Line: Being audit-ready isn’t about scrambling when an auditor calls—it’s about building clean, transparent systems that reflect your nonprofit’s mission.
Pro tip: Partner with a Fractional CFO to put these practices in place and ensure your organization is always ready for scrutiny.
Understanding Cash Flow: A Key to Success for Small Nonprofits and Businesses
Cash flow is the lifeblood of any organization, yet it’s often an area that gets overlooked until there’s a problem. For small nonprofits and businesses, managing cash flow effectively is crucial to ensuring sustainability, growth, and the ability to fulfill your mission. In this blog, we’ll break down what cash flow is, why it’s so important, and provide some actionable tips on how to improve it for your organization.
What Is Cash Flow?
Cash flow refers to the movement of money in and out of the business or nonprofit over a specific period. It's more than just revenue—it includes operating expenses, investments, and any external funding or loans.
Why Cash Flow Matters
Cash flow is crucial for small nonprofits and businesses because it ensures operational efficiency, supports future planning, and enables mission sustainability. Here’s why it matters:
• Operational Efficiency: Without enough cash flow, even the most promising business or nonprofit can struggle to meet day-to-day expenses like payroll, rent, or inventory.
• Planning for the Future: Cash flow enables you to plan for the unexpected, invest in growth, or cover slow periods.
• Mission Sustainability for Nonprofits: Positive cash flow means nonprofits can continue to serve their communities and fund programs without relying on emergency donations or loans.
How to Manage Cash Flow Effectively
Here are some actionable tips for nonprofits and small businesses to manage cash flow effectively:
• Regularly Monitor Cash Flow: Use tools like QuickBooks to track cash inflows and outflows, reviewing regularly.
• Create a Cash Flow Forecast: Predict cash flow shortfalls and surpluses to better prepare.
• Cut Unnecessary Expenses: Regularly evaluate and eliminate unnecessary costs to optimize cash flow.
• Diversify Revenue Streams: For nonprofits, seek additional grants or fundraising opportunities. For businesses, explore new products or services.
• Negotiate Payment Terms: Work with vendors and clients to establish favorable payment terms to improve cash flow.
Conclusion
Cash flow isn’t just a financial term; it’s essential to the survival and success of small nonprofits and businesses. With the right tools and strategies in place, managing cash flow can help ensure you meet your immediate needs and continue to grow in the long term.
How to Create a Budget That Actually Works for Your Small Business
A good budget doesn’t just track spending—it drives decision-making. Yet many small business owners either avoid budgeting altogether or create one they never look at again. A working budget should be flexible, realistic, and tied to your business goals. Here’s how to create a budget that works in the real world, not just on paper.
1. Start With Your Why
What are your goals for the next 12 months? Whether it’s launching a new service, hiring staff, or paying off debt, your budget should support your vision—not just record expenses.
2. Gather Your Historical Data
Look at the last 12 months of revenue and expenses. Identify trends, seasonal spikes, and fixed vs. variable costs. This will be your baseline for realistic projections.
3. Project Revenue—But Be Conservative
List all income streams: product sales, service fees, recurring contracts, etc. Be realistic and build in buffers. Overestimating revenue is one of the most common budgeting mistakes.
4. List Out All Fixed and Variable Costs
Start with fixed costs (rent, salaries, insurance) and then estimate variable ones (marketing, supplies, travel). Don’t forget irregular expenses like software renewals or annual filings.
5. Include Taxes and Owner Pay
Too often, business owners forget to set aside money for quarterly taxes—or skip paying themselves. Build these into the budget from the start.
6. Plan for Profit
A working budget includes a profit goal. This could be reinvested in growth, saved for a cushion, or used for future projects. Don’t wait to see what’s left over—budget for it.
7. Use a Simple Spreadsheet or Software
Your budget doesn’t need to be fancy to be effective. Use Excel, Google Sheets, or software like QuickBooks to keep it clear and accessible.
8. Review and Update Monthly
A static budget is a dead budget. Schedule a monthly review to compare your actuals vs. budget, make adjustments, and stay proactive—not reactive.
9. Share With Key Stakeholders
If you have a business partner, team, or board, share the budget and get buy-in. Financial transparency supports alignment and accountability.
10. Get Help If You Need It
Don’t go it alone. A bookkeeper or Fractional CFO can help you build a budget that’s not only accurate but strategic—and support you in using it all year long.
A budget that works is more than numbers—it’s a roadmap. The time you invest in planning your finances now will save you stress, support growth, and help you run your business with confidence.
Need help creating or reviewing your budget? Let’s talk.
📧 info@dmgaccounting.com | 🌐 www.dmgaccounting.com
How to Set Up Financial Systems for a New Nonprofit
Starting a nonprofit is an inspiring journey—but it’s also a serious financial responsibility. Setting up strong financial systems early on will help you stay organized, accountable, and ready to grow. Here’s a step-by-step guide to building a financial foundation that supports your mission.
1. Open a Dedicated Business Bank Account
Never mix personal and nonprofit funds. Open a separate checking account in the nonprofit’s name. This protects your liability, supports transparency, and makes accounting much easier.
2. Set Up Your Chart of Accounts
The chart of accounts is the foundation of your bookkeeping system. It organizes your revenue, expenses, assets, and liabilities. Be sure to include accounts for donations, grants, fundraising income, program expenses, and admin costs.
3. Choose Accounting Software
Select accounting software that fits your budget and reporting needs. QuickBooks Online, Aplos, or Wave (for very small orgs) are popular choices. Look for features that support fund tracking, donor management, and nonprofit-specific reports like the Statement of Activities.
4. Establish Internal Controls
Put safeguards in place to prevent errors and fraud. Examples include requiring dual signatures on checks, separating financial duties, and having regular oversight from the board or a finance committee.
5. Build a Budget
Start with a simple annual budget based on your expected income and expenses. Align your budget with your mission and goals, and revisit it regularly to make adjustments.
6. Track Restricted vs. Unrestricted Funds
Some grants and donations come with strings attached. Use your accounting system to track restricted funds separately from unrestricted income, so you always know how much is available for general use.
7. Set a Schedule for Regular Bookkeeping
Update your books weekly or monthly. Don’t wait until the end of the year! Regular maintenance helps you catch errors early, stay compliant, and provide real-time reports to leadership or funders.
8. Prepare for Tax and Compliance Requirements
Even tax-exempt nonprofits must file annual returns (usually Form 990). Stay on top of deadlines, registration renewals, and reporting requirements for your state and funders.
9. Educate Your Board on Their Financial Role
Your board has fiduciary responsibility. Make sure they receive financial reports, understand them, and participate in key financial decisions. This builds transparency and accountability.
10. Consider Hiring a Professional Early On
Even part-time or project-based support from a bookkeeper or Fractional CFO can give you peace of mind. They’ll help set up systems the right way and keep you from making costly mistakes down the road.
Starting with the right financial systems sets your nonprofit up for success. It shows funders, board members, and your community that you take your mission—and your money—seriously.
Need help getting set up? I work with new and growing nonprofits to build simple, scalable systems that support long-term impact.
📞 Schedule a meeting
📧 info@dmgaccounting.com
🌐 www.dmgaccounting.com
How to Know If You Need a CFO (Even If You're Not a Big Company)
When most people hear "CFO," they think of Fortune 500 companies with massive finance departments. But more and more nonprofits and small businesses are bringing on Fractional CFOs—part-time or project-based financial experts—to help them grow smarter, not just bigger.
So how do you know if you need a CFO?
Here are the key signs:
1. You're Making Important Decisions Without Financial Data
If your leadership meetings rely more on gut instinct than clear financials, it's time to bring in a CFO. A CFO helps turn your bookkeeping and reports into real insights—so you can make confident, data-backed decisions.
Example: You’re deciding whether to expand, but you don’t know your true cash flow runway or margin by service area.
2. You’re Growing—But Not Sure If It’s Sustainable
Growth is exciting… until it starts stretching your cash, your team, and your systems. A CFO helps you build financial forecasts, align spending with growth, and avoid crisis-mode surprises.
Red flag: “We’re busy and bringing in money, but we still can't make payroll stress-free.”
3. You Need Better Reports—But Don’t Know What to Ask For
Your bookkeeper can give you a profit & loss statement, but you're not sure what it means—or what it should be telling you. A CFO builds custom dashboards and explains what your numbers actually mean.
What to look for: Late or unclear monthly reports. Financial meetings that feel overwhelming.
4. You're Fundraising or Seeking Grants/Loans
Whether you're applying for a line of credit or a multi-year grant, your funders want to see clean, consistent financials. A CFO helps you package the right story—and ensures the back office is ready for scrutiny.
5. Your Bookkeeper or Accountant Is Doing Too Much (Or Too Little)
There’s a difference between bookkeeping, tax filing, and strategic financial planning. If you’re relying on one person to do all three—or your finance team is overwhelmed—a CFO helps bridge the gap.
6. You're Building a Budget That Feels Like Guesswork
A CFO builds budgets based on history, reality, and vision—not just ballpark figures. They help create flexible financial plans that guide your board, leadership, or investors.
So, Do You Need a CFO?
If you recognize yourself in any of the above, the answer might be yes. The good news? You don’t need to hire a full-time CFO to get expert guidance.
Fractional CFOs work with organizations like yours to provide strategic finance help on your terms—whether that’s 5 hours a month or one strategic project a quarter.
Ready to Talk?
If you’re wondering what a CFO could do for your organization, let’s schedule a quick consultation.
📞 Schedule a meeting
📧 info@dmgaccounting.com
🌐 www.dmgaccounting.com