Author: 
Linda Hayes, Corporate Synergies Australia
Balancing people and money

There is a growing expectation for organisations to be able to quote the Unit Cost of every service, activity, output and outcome of each program, for each individual, to each government department.  This is already a requirement for child care and aged care, and will be introduced into the disability sector under NDIS.

Community sector organisations commonly relate cost of doing business with the dollar value of our direct costs to deliver our contracted service.  Most simplistically, this will include the wage of the service person, and any equipment or transport that they might need.

However knowing our full cost involves the identification, categorisation, measurement and valuation of ALL the resources of the organisation that are required to achieve the not only the service delivery (output), but the quality of outcomes and, ultimately, the objectives and achievements of the organisation.  In other words, recognising all direct and indirect costs of the organisation as part of the unit price.

If you are looking at unit costing for the first time, a great place to start is to categorise all of your expenses across 5 key categories:

Direct employee costs: wages, payroll, super, lsl

Direct service delivery: equipment and supplies required

Direct operating expenses: mandatory training, insurances, workcover, phones, IT, vehicles, compliances, mandatory audits

Indirect operating expenses: skills development and training, non-essential IT, staff rewards, quality improvements, website, communications

Indirect organisational overheads: conferences, board and committee expenses, consultants, strategic planning days, non-mandatory audits

For a simple unit calculation, divide each one of these cost categories by the number of service hours delivered, and then compare to the “price” paid for that service (funding received per hour or per unit of service).

The critical question is at what category does the cost of our service overtake the price we are receiving?

Other financial sustainability resources on Community Door

The Unit Costing Tool allows you to understand your cost drivers, and plan and negotiate the level of service you can deliver with a given set of resources

The Organisational Development Toolkit: particularly section four (financial sustainability)

Professional development resources developed through the sector readiness initiative

Organisational development modules (Module one: costing, pricing and budgeting)

A recording of the organisational health check-up webinar held in August 2015, and associated resources

The financial management resources on Community Door

Financial management videos and podcasts on StudioQ

A list of external resources around financial sustainability

About Corporate Synergies Australia (CSA) and Linda Hayes

With over 20 years experience in business development, strategy and marketing, Linda has worked across a vast range of industry sectors to assist organisations deliver business growth and sustainability through tactical solutions and strategies.  

Linda has worked with over one hundred not-for-profit organisations throughout Australia, and was an orginal contributor to the Workforce Council’s Sector Development tools for Costing, Pricing and Budgeting, and Financial Viability and Sustainability available through QCOSS’s, Community Door website.

CSA is currently a panelled service supplier to the Commonwealth Department of Social Services (Aged Care), the NSW Office of Communities (Aboriginal Affairs) for administration management, a preferred trainer and mentor to Bendigo Bank Community Branch Boards, preferred trainer and business adviser for National Disability Services (Qld) members.

Linda is a Certified Practitioner in Governance and Risk Management, Graduate of the Australian Institute of Company Directors, and holds a Bachelor in International Business as well as certifications in training and project management.

Connect with Linda Hayes via LinkedIn

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