Business continuity
Business continuity is commonly thought of as:
Business continuity generally requires the entity to be able to
operate at a profit, or at least a break-even point over the period
envisaged. This may be a short term project or an organisation with an
ongoing purpose.
To ensure business continuity an organisation must be able to
generate sufficient cash from members’ subscriptions, trading or
commercial profits, investment income, or gifts and donations. Generate
the cash first and then use it to cover the costs of services that will
be provided.
Short term projects
Some not-for-profit organisations are set up specifically for time-dated
projects or objectives, as for a fund for relief after a natural
disaster. As they will not plan to continue in the medium term, revenue
will need only to meet short term expenditure.
Organisation with an ongoing purpose
A not-for-profit organisation such as a sports club, a member
organisation, or a disability service provider that is set up with an
ongoing purpose must take careful measures to ensure that it can
continue to operate on a long-term basis.
To continue, it must collect sufficient revenue in an appropriate way
to cover the costs of the planned programme.
Staff services
Staff are vital to an organisation. Losing the services of Board
members, paid and volunteer staff can effectively close down a
not-for-profit organisation.
Long-term contracts
Service delivery contracts with central or local government generally
have an expiry date. Care must be taken to renegotiate the contract
before the expiry date especially where it is the major source of income
for the not-for-profit.
Delaying negotiations, or not completing them by the expiry date,
means payments may stop. Long delays mean an organisation must have
enough working capital or reserves or it will need to borrow funds to
continue.
If an organisation does not continue, it still needs sufficient funds
in hand to cover any closing down costs such as staff holiday pay and/or
redundancy as well as the balance of any amounts that have been borrowed
and selling costs of any remaining assets.
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