Why Is Monitoring Direct And Indirect Costs Important To The Financial Stability Of A Human Service Organization?


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A Human Service Organization is a non-profit organization and because of this it is highly important to monitor carefully the earnings and outgoings. A large organization such as a Human Service Organization will most definitely have an annual budget to stick to. With rising demands on agencies and an increase in staff numbers, the budget should be monitored regularly to ensure that expenditure is within its means and that finances don't fall into the red.

It is also worth noting that many Human Services Organizations rely on charity and fund raising to bring in more revenue for the company too, as they are a non-profit organization and cannot rely on a business model as there is no profit to be made.

Indirect costs are costs that would occur regardless of the business model, it is a cost that most, if not all, businesses incur. These include rent, mortgage and utility bills such as electricity, gas, water and, of course, tax.

A direct cost relates directly to the organization and the daily running of it, for example; staff salary and staff expenses, refreshments that are supplied to the staff in a canteen or on a complimentary basis, equipment and facilities, which include computers, stationary, furniture and even vehicles.

Financial stability, which is a function of indirect and direct costs of an organization, must be kept track of and monitored accurately, as monitoring them ensures there is enough money to cover everything, that no money is being wasted, that no money is being lost, and so it can be assessed for example if the company decided they wanted to make cut backs.

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