Things to account for whilst forecasting a not for profit organization

To carry out its purposes, any organization needs to have financial means (to invest, to pay to its workers or to pay suppliers). It needs money just as a regular business. Those financial resources come from the revenues it generates (if you believe a not for profit does not have revenues, please check the previous post) and from its funding (donations or contributions).

Funding

The first source of funding is the membership fee (does not imply that it will be largest source of money). It may vary from country to country, but one common basis, organizations, associations or foundations do not have equity, nor equity holders. They are founded by members who may give or pay an initial financial contribution (the initial fee) and pay a regular amount (the membership fee). The periodicity of the membership fee may vary: monthly, quarterly, annually. The fees are not returnable to the members, nor can they expect to be paid a dividend on the basis that they have paid the membership fee. The fee may entitle members to certain benefits but should not correspond directly to a particular product or service.

Organizations do not have equity value, but they do hold a patrimonial value.

The second source of funding is through the income of contributions, donations or subsidies that are given to the organization by individuals, by companies, by other organizations or by government agencies. Again, these do not correspond to a sale of a product or service, although these sources of income may be awarded to the organization for it to carry out a specific service or product. An example: a subsidy for theater company for it to hold a play that is free to the general public.

The final source of funding is through the sale of goods and services. An example: an organization that holds an elementary school where students whose parents have higher incomes pay an attendance fee, while lower income students are exempt from paying the fee; by charging the fee for the higher income students this school is able to fund its operations and perform a social goal.

What to look for while using CASFLO for an organization

Because these organizations do not have equity, you should not put any amount in the following assumptions:

  • Issued capital
  • Other equity instruments
  • Shareholders loans

Contributions, donations and subsidies should be set in the other gains and costs section. Contributions and donations should be set as other gains. Government subsidies should be set either as operational grants or investment grants.

The sales of products and services should be assumed just like in a common business.