Costing and pricing your service
What is Costing and Pricing and why is it so important?
Under the Delivering Community Services in Partnership Policy (DCSP Policy), community service providers shift from price takers to price makers. This will require community service organisations to calculate the total cost of their service delivery.
There are a number of costs that you need to consider:
• What are you trying to cost, what is the end objective of the costing i.e. cost of a particular service delivery, program, organisational activities or organisation unit;
• What process is being delivered, where does the process start and end;
• What is the time period of the service being costed;
• What are the full costs of the service, including direct (staff and on costs) and indirect costs (motor vehicle, office equipment and rent etc);
• Are you costing the service/son a cash or accrual accounting basis?
Fully developed financial and accounting systems are essential in order to be able to cost fully a community service. To accurately calculate community service delivery costs you need to:
• Keep good financial records – financial transactions are properly recorded and reported;
• Maintain budgets that accurately reflect income and expenses and have reporting and evaluation mechanisms ;
• Use the standard chart of accounts so that you are able to accurately capture costs;
• Management of external influences such as changes to funding or taxation
• Assign cost codes to each program or service to enable a breakdown of each cost item; and
• Provide financial statements that are able to verify income, expenses, depreciation and amortisation
Financial viability is essential if an organisation is to meet its ongoing obligations, board members and other officers need to ensure that they have a reasonable understanding of financial related matters to ensure that governance obligations are being met.
Please click here to download a Budget tool and example