Trending and benchmarks are advanced methods used to analyze an organization’s performance. A board of directors can use these calculations to evaluate an organization’s stewardship of funds. In addition to measuring organizational performance, they measure an organization’s financial performance as well.
Trending is an effective and essential method because it permits the display and analysis of data across time. Without the use of trending, a board is only given a snapshot of data, frozen in time. One may analyze a year’s worth of data as well as observe ratios from prior years. Trends are more easily observable using this method. The most effective presentation of trending is through well-designed graphs, charts, and tables. Narrative explanations along with trending can give a board a fuller picture of an organization’s financial performance.
Benchmarking allows for comparisons with other nonprofit organizations in similar arenas. Using this method, an organization compares its ratios, trends and analysis, both financial and non-financial, with equivalent organizations. Perhaps when a board regards a particular ratio of one organization alone, things may look grim. However, when comparing it with other organizations, the board may realize it is very much in step with other organizations’ performances. This may not fully negate the organization’s need to improve in that area but it gives a more realistic perspective of an organization’s true financial state.