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Posts Tagged ‘management

Non-profit organizations, an added value for the society.

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In our society where economy is an important component creating wealth, I often heard critics about the non-profit organizations and associations. People are wondering if the subsides these organizations are receiving are correctly used. In other words, people are wondering if the institutions which do not create economical wealth, are not a charge for the society, and if there are useful. It is of course a pertinent question and people have the right to know how the taxes there are paying are used. People have the feeling that the taxes they are paying are not correctly used, but does it mean that non-profit activities are useless for the society? It should be a quick and wrong conclusion.

Non-profit organizations and associations, in different sectors, cultural or social are playing an important role in the society. We can see different interesting aspects of this sector of activity, but there are also conditions that need to be filled and which are filled in a lot of cases, making that people can have the feeling that their money is correctly used. What are these conditions?

  • Selection of project and the benefit they will produce: there are several needs to be covered in the society, needs that the private sector is not covering because there is no link with their activity and because the final goal is not the profitability. A detailed presentation and activity plan, and determined goals need to be presented in order to see what are the positive effects on economical, social and local level. The allocation of subsides need to be voted by a committee including independent members.
  • Project management and competences: non-profit organizations and associations are non-profit enterprises. It means that they have to face several challenges and issues on financial, legal and organizational level. In order to reach the goals on an efficient way with the allocated funds, some skills and competences are needed. As investing time myself in non-profit associations, I often see some lacks in term of competences, which has a negative impact in term of sustainability.

  • Concrete results: The associations launching projects have to produce concrete results, to justify the allocated amounts. They have the obligation to show the return on invested amounts, not on an economical point of view, but on social, educational, environmental level, depending of the scope of the project.

  • Financial sustainability: The allocated funds have to be spent correctly and each association has to implement controlling process in order to maintain the finance in break even. By creating debts and not paying contractors or employees, you do not reach the social goal of such organization. This is in my mind the weakness of some associations. The goal of a non-profit organization is not to make profit, as the name is saying, but it does not mean that the financial management is useless. I often see projects failure due to lack of management, with negative consequences.

These are some conditions needed to ensure that subsides are usefully allocated to projects. The quality of a project can be measured by the provided benefits. These benefits can be found on different levels, and make that non-profit activities are complementary of the economy. What are the benefits?

  • A positive contribution for the society: the associations are covering a range of services to the society, services not ensured by the private sector. It goes from social or medical services for aged people, for people facing temporary difficulties, also services in the education giving an access to knowledge and culture for everybody.

  • Local employment: this sector is creating local employment. Employment is a important key of social integration.

  • Local economical benefits: these associations are using local services. There are in fact a vector of wealth redistribution, as the allocated subsides have to be spent. The money they are receiving do not remain blocked and sleeping on bank accounts. It has a positive impact on local economy.

  • Personal positive effects: Some non-profit organization and associations are working with volunteers. Some studies show that people having a volunteer activity are in a better psychological and physical health. As mentioned, age is a question of mind. It is not because you reach a certain age that you are unable to contribute to a project, that you are unable to have activities. The fact to contribute to the community, empower the feeling to be useful and the feeling of social integration. We can see also a positive effect and cost reduction for the social security. If people are going well, they need less medical services. Globally, and as already mentioned in other postings on this blog, people need to have a project, to face challenges. The gained successes are an important factor of self- trust and wellness. Such activities have to be recognized, and encouraged. People should be encouraged to do an activity with the rhythm it agreed to them.
  • Social and educational benefits for the community: some social activities, related to education, are contributing positively to a better social and public environment. For instance, structures taking care of the children during holidays or when they are coming back from school and when the parents are still at work. These structures where animators are helping them to do the schoolwork, or by organizing games or activities, avoid these children to stay in the street, abandoned to the boredom, and avoid them to go to delinquency.

By mentioning these points, I tried to show that non-profit organizations and associations have a positive function in the society, on social and economical level. They have to be seen as a complementary activity of the economical activity. Do not forget that the economy is providing taxable wealth and that of course, without a strong economical activity, the public and associative world can not work. It is a question of balance, where each actor has to play the game, by respecting rules and with transparency, where initiatives have to be encouraged and supported.

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Written by Eric Saint-Guillain

March 28, 2011 at 07:19

Financial people: added value for companies?

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Finance people, cost or investment for companies ?

During my career, I often heard about this sentence: “Finance and administrative people are a cost for the company and do not really provide added value!” For me, it songs a little bit if you are saying that the dashboard of your car is useless and do not provide any added value. And what about if your car engine is loosing oil, and that you are not noticed about it ? You will not drive for a long time.

That sentence was said in the way that only sales people are making money for the company. It is obvious how much important it is to have good sales people in order to generate sales and revenues for a company. But sales are only a part of the business cycle. There are a lot of question related to that cycle and to the others: How much have we to sale and at which price, in order to generate enough margin to cover direct and indirect costs? What about the solvability of the customers? The basics of accounting are very simple: the arithmetic! When I was at school to study accounting, I remember a teacher of financial management explaining this on a very easy way: “You buy a good 1 Usd, you sell it 2 Usd, you generate 1 Usd of cash!”..and if you add the other principle saying that “The deal is closed when the check is in the bank”, then you are able to understand what is accounting.

When people are saying that finance people cost more that they provide added value, they are still seeing the accounts like beans counters. My grand father was entrepreneur, and I remember the time when he was visited on a regular basis by his accountant, who was doing accounting following the old method. No computer, only books, papers and a pencil. But this was a long time ago, and there were a lot of changes since that time ! First of all, it is not necessary to underline the development of information technologies which have a major impact on company organizations. And the major function of these systems is to transform data into information. With the development of technologies, there were transformations in the financial department activities. Today, with these tools, we are able to compile huge ranges of data and provide detailed analysis and reporting.

The other major point is the implication of finance people in the business. Figures have no senses if you ignore what is behind then. The quality of a controller, of a financial analyst is to have a clear picture of the business and the processes related to it, and to ensure that the figures he is providing make sense. The accuracy of figures is important in an aggressive competitive environment where the margins are decreasing. Recently, a media distributor of the Brussels region, with important market shares, felt in bankruptcy, victim of the cd’s market fall, but also of a lack of financial management. When the margins are comfortable, management mistakes have sometimes not big consequences, but when the margins are thin, then it is the beginning ..of the end!

To say that finance people represents more costs than added value is not correct, but it depends the role you are giving to then in the organization. Finance people, as the members of other departments, are partners of the company. They are playing also a key role in the company management. It is true, when you see the frequency the quoted companies have to publicize figures. Finance people have to be aware about the goals and targets, the defined strategies and business plans, in order to provide the appropriate advices and services, and to measure the financial impact of each alternative, to translate each alternative in figures. Let us underline the fact that finance people are not only here to provide statements and figures of the past, but they are here also to ensure the daily business, and to plan the future with the other departments of the company, they are internal services providers.

Do not forget that the success of a company is a common success and not a personal success, there is no personal success without common success.

Written by Eric Saint-Guillain

March 8, 2010 at 22:44