Our world would stop without the not-for-profit groups.
Literally, our regional communities and local economies depend on a small army of good people, mostly organised in non-profit associations (NFPs), to deliver a huge range of essential services. Aged care, childcare, disability services, youth services, public safety and emergency response, health, education, recreation, business networking, visitor attraction, major events… you name it.
That “Profit” Word
The one thing all these organisations have in common is a provision in the constitution saying they are not-for-profit. What does that mean? Let’s destroy one myth here and now. It does NOT mean that they can’t run at an operating surplus of income over costs. They can and they should. What they can’t do is distribute any such surplus (=profit) to their members. Consider a shareholder in, say, ANZ. If you own shares in ANZ (you are a “member” in the old legal language), and ANZ makes a profit (=surplus of income over costs), you get a share of that.
Apart from this important difference, an NFP works with essentially the same set of rules, obligations, requirements and risks as any company of comparable size. So when we work with NFPs (as we do a lot), we treat them as businesses in disguise. They need to be excellent at strategy, risk management and governance; they need to hire the right people to do the right jobs; and they need careful stewardship of their capital and other assets.
What should an NFP do with accumulated operating surpluses? First, have a reserve for the inevitable rainy day. Second, invest back into building the capability to deliver the service better and better, in the face of rising complexity and uncertainty. The habit of continuous improvement is crucial.
There’s also a pivotal role in community building and social impact. By reinvesting surpluses into community programs, educational initiatives, or infrastructure, NFPs can amplify their good work, facilitating both social and economic benefit.
How We Can Help
We’ve worked with many of these excellent organisations, in many fields. Usually, they are very good at what they do at the coal face, because that’s where the passion and energy is. Often their board (or governing committee) has limited experience with governance, strategy and risk. We have tailored in-boardroom training, and specialist advisory services to meet these exact needs.
Should your non-profit be a powerhouse of community impact? Reach out to discuss how we can support your journey towards excellence and resilience.