Non-Profit Organization Finances and Pricing

Non-Profit Organization Finances and setThe world(prenominal) Alliance for TB Drug Development (TB Alliance) is a non-profit system of rules which uses its revenues to develop untested, simpler, faster-acting TB drug regimens1 rather than distributing those profits to its shareholders and lineup of directors.2 It is also a PDP (product development partnership) that operates like a biotechnology firm creating collabo balancens between the cliquish, public, academic, and philanthropic fields to twit the development of new TB drugs for developing countries using various(a) licensing and partnership agreements. In this way take chances and incentives are shared between the partners. TB Alliance manages the various projects although the laboratory experiments and clinical studies are performed by external partners. Donors include offstage foundations, g everywherenments, multilateral conferrers including the Bill Melinda Gates Foundation, the European Commission, the Global H ealth ripe Technology Fund, Irish Fund, National Institute of Allergy and Infectious Disease, UK AID, UNIT AID, United States Agency for external Development, and the US Food and Drug Administ symmetryn.3 As a corporation, TB Alliance has to maintain legal stipulation and reporting functions by filing reports with federal, state and local authorities. However, they have to demonstrate no profit and picture how the money was utilized by submitting a Form 990 to the Internal Revenue Service (IRS) to keep their tax-free status.4 The monetary get for non-profit research base physical composition is important because it is funded by various donors. The control board of directors and focal point of TB Alliance are accountable for how the money is spent for research, administrative activities, and production of new, faster-acting and affordable TB drugs.Ratios to Mea certain(prenominal)(a) the Financial Position of an Organization An efficient measure which could analyse the tre nds and fiscal position of the organization over a period of time is the ratio abbreviation. Ratio analysis is a gauge which indicates the organisational financial performance.5 Management of a non-profit organization uses ratio analysis in order to highlight the flaws and strengths of various strategies on the basis of which plans could be shaped. Funders or private donors of the organization can use the ratio analysis to measure the efficiency and dominance of the projects and make decision approximately managements performance.6The assessment of financial condition of non-profit organization starts with the evaluation of financial reports.7 Various ratios are on that point to analyse the financial position of organization but a ratio is more useful if it is consistent in nature over time and measure the precise financial information.8 We norm aloney look at the published yearly reports http//www.tballiance.org/annualreport/ and check out their financial position and look for any red flags. We make sure their cash position is untroubled relative to the annual operating income, and their equity / net assets are reasonably positive. We also make sure that any grant or investment we give is not a huge percentage of their annual budget.9There are eleven ratios identified by Non Profit Assistance Fund which could be apply by a non-profit research ground organization which is funded by private donors.10There are 5 Balance sheet ratios which could be used by a non-profit organizationDebt ratio It is used to dig into how much organization is relying on other people debts and how much cushion there is for the company. It is calculated by dividing summate debt to centre net assets.11Current ratio Current ratio is current assets to current liabilities and it identifies the mightiness of the organization to pay its debts on time. It is a measure which tells about the cash flow in burn up future.12Days cash on hand It is cash and current investments to daily cash requirement and helps to fall upon the amount of operating cast required by organization. It is right-hand as it tells about the unrestricted cash available to the organization.13Accounts receivable aging Account receivable aging ratio is important because it helps to let on all those bills which have become older and are aberrant. This ratio identifies the cash flow problems of the non profit organization. It consists of all the accounts account payable overdue for more than 90 days to total accounts receivable.14Accounts payable aging It is all the accounts payable over due for more than 90 days to total accounts payable. It specifies the cash flows problems related to payments and serve as a tool for several financial problems.15There are 3 expense ratios which are important for a non-profit organization as donors will need to examine the expense incurred and these arePersonnel salutes ratio It indicates the expense incurred on the human resource of the organization and tells how much budget is allocated for staff. It is the total wages to total expense.16Administration live ratio It is the total general and administrative expense to total expense. It is very helpful for the donors who regularly examine the expenses of company over time.17Fundraising efficiency It is the income contributed to fundraising expense. As the organization raise funds from private donors its important to know each dollar which is being raised from the contribution by subject expense on fundraising.18There is 1 ratio related to income statement Reliance ratio. This ratio helps to identify the major source of income which is utilized by the organization for income. It highlights major activities which help to increase organizations income and it is the largest income source to total income.19Contracts and Its Affect on Provider Behaviour Private donors can use Donor Advice Funds which is a written agreement between the donor and the non profit organization.20 It is the f astest growing technique for non profit organization funded mainly by private donors. In this take aim a special fund is created by the private donor to donate as charity or for well being of society. In this type of boil down there is an agreement between the organization and the donor which states that the non profit organization will respect the donors wishes while using funds. But the agreement is non-binding and the ultimate decision and control is in the custody of non profit organization. The nature of provider in the contract is advisory and can only give suggestions to the board of non profit research company and the ultimate decision lies with management.21Contracts can be (1) Fixed expenditure contract when there is no uncertainty in the scope of work. The contractor is bound to complete the task at heart the hold amount of money and time and is required to finish the task within a determined amount. In this type of contract, the contractor bears the risk and the s cope needs to be as detailed as possible22 (2) Cost reimbursable contract where the contractor is reimbursed for completed work and paid a certain amount representing the profit. In this type of contract, the buyer bears the risk since the buyer pays for all (allowable and reasonable) tolls incurred by the contractor23 (3) snip and Materials contract when a contractor is paid on the basis of court of labor specified hourly, actual cost of materials and equipment used, and an agreed upon amount to cover the contractors overhead with instructions not to exceed a certain limit. Here the risk is distributed between both buyer and seller24.Pricing Policy and Costing Methods Price is the abide by charged for a product and price policy is the strategy by which the wholesale or retail price of the product is stubborn.25 In developed countries the price of product is high due to high cost of RD as compared to underdeveloped countries.26 Various costing methods which could be used by org anization are cost based, competition based and value based pricing. Cost based pricing is the price of product decided according to the cost plus a profit margin. Cost based pricing consider both the fixed plus variable cost of the product and adds a margin over it.27 Competition based pricing is a pricing technique that considers the industry in which the firm is operating and the competition.28 Finally, Value based pricing is the customer based pricing technique which is based on customers needs, habits and attitudes.29 The pricing structure for a non-profit pharmaceutical company providing inexpensive drugs is cost based pricing method which includes the fixed and variable cost plus an addition of suitable profit margin to cover the expenses for instance Howard Hugh medical institute uses cost based pricing. 30 The company can also use three tiered pricing policy in which it could make the pricing strategies by dividing countries into groups. The drugs could be sold at marginal cost in those countries where there is hard strike of disease and can be sold at a higher price with profit margin to pump income countries for instance Abbott uses three tiered pricing policy.31 GlaxoSmithKline was one of the first vaccine companies to adopt this approach higher prices for high income countries low prices in GAVI eligible countries and intermediate prices in middle income countries. 32ReferencesAllen, S. Pricing Methods. 2015. http//entrepreneurs.about.com/od/salesmarketing/a/pricingstrategy_2.htm (Accessed 2015-3-9)B. Barkin, TB Finance Manager, Bill Melinda Gates Foundation (personal communication, March 13, 2015)Basu,C. foursome Basic Types of Financial Ratios Used to vizor a Companys Performance. 2015. http//smallbusiness.chron.com/four-basic-types-financial-ratios-used-measure-companys-performance-25299.html (Accessed 2015-3-9)Bate, R. Boateng, K. Drug Pricing and Its Discontents. 2007. http//www.aei.org/ outcome/drug-pricing-and-its-discontents/ (Accesse d 2015-3-10) communication channel Dictionary. Cost reimbursable contract. http//www.businessdictionary.com/definition/cost-reimbursement-contract.html (Accessed 2015-3-10)Business Dictionary. Time and materials contract. http//www.businessdictionary.com/definition/time-and-materials-T-M-contract.html (Accessed 2015-3-10)Chabotar, k., J., Financial ratio analysis comes to not-for-profits.The Journal of higher(prenominal) Education, 1989.pp. 188-208.Chuang, J., and Marvin, S. Pricing multicast communication A cost-based approach.Telecommunication Systems, 2001, vol.17, no.3, pp. 281-297.DCU. Charitable Planning Donor assured Funds vs. Private Foundations. 2015. http//dcufinancial.org/new/dcufinancial/content.asp?contentid=2017940795 (Accessed 2015-3-10)FRA. Financial Ratio Analysis 2013. http//www.demonstratingvalue.org/resources/financial-ratio-analysis (Accessed 2015-3-9)Global Alliance for TB Drug Development. (2015) http//www.tballiance.org/about/operating-model.php (Accessed 20 15-3-9).GSK Tiered pricing and vaccines. (2014) http//www.gsk.com/media/280905/tiered-pricing-for-vaccines-policy.pdf (Accessed 2015-3-13)Herman, R. D., Renz, D. O. Theses on nonprofit organizational effectiveness.Nonprofit and voluntary sector quarterly, 1999,vol. 28, no. 2, pp. 107-126.Investorwords. Fixed Price Contract. http//www.investorwords.com/19291/fixed_price_contract.html (Accessed 2015-3-10)Joskow, P. Alvin, K. A framework for analyzing predatory pricing policy.Yale Law Journal,1979, pp. 213-270.Kanter, R. M., Summers, D. V. Doing well while doing good Dilemmas of performance criterion in nonprofit organizations and the need for a multiple-constituency approach.Sage egress, 1994, pp. 220-236.Kaplan, R. Strategic performance measurement and management in nonprofit organizations.Nonprofit management and Leadership, 2001,vol.11, no. 3, pp.353-370.Mckeever,M. Family Foundations Donor Advised Funds and Supporting Organizations as Alternatives to Private Foundations .199 9. http//www.pgdc.com/pgdc/family-foundations-donor-advised-funds-and-supporting-organizations-alternatives-private-foundations (Accessed 2015-3-10).NAF. Analyzing Financial learning Using Ratios. 2014. https//nonprofitsassistancefund.org/sites/default/files/publications/nonprofit_financial_ratios_2013.pdf (Accessed 2015-3-10).Nagle, T., T., and Reed K., H.,Strategy and tactics of pricing. Pearson Education Limited, 2013.Salamon, L., M., The rise of the nonprofit sector.Foreign Affairs, 1994, pp. 109-122.Tuckman, H., P., and Cyril F. C., A methodological analysis for quantity the financial vulnerability of charitable nonprofit organizations.Nonprofit and Voluntary Sector Quarterly, 1991,vol.20, no.4, pp.445-460.Zall, M., The Pricing Puzzle. 2006. http//pubs.acs.org/subscribe/ scroll/mdd/v04/i03/html/03zall.html (Accessed 2015-3-10).Z, J., Nonprofit financial objectives and financial responses to a tough economy.Journal of Corporate Treasury Management,2010,vol.3, no.3, pp. 238-24 8.1 Global Alliance for TB Drug Development. (2015) http//www.tballiance.org/about/operating-model.php (Accessed 2015-3-9).2 R. M. Kanter, D. V. Summers. Doing well while doing good Dilemmas of performance measurement in nonprofit organizations and the need for a multiple-constituency approach. Sage publication, 1994, pp. 220-236.3 Global Alliance for TB Drug Development. (2015) http//www.tballiance.org/about/operating-model.php (Accessed 2015-3-9).4 B. Barkin, TB Finance Manager, Bill Melinda Gates Foundation (personal communication, March 13, 2015)5 R. D. Herman, D. O. Renz. (1999). Theses on nonprofit organizational effectiveness. Nonprofit and voluntary sector quarterly, 1999,vol. 28, no. 2, pp. 107-126.6 FRA. Financial Ratio Analysis. 2013. http//www.demonstratingvalue.org/resources/financial-ratio-analysis (Accessed 2015-3-9).7 R, Kaplan. Strategic performance measurement and management in nonprofit organizations. Nonprofit management and Leadership, 2001,vol.11, no. 3, pp. 353-370.8FRA. Financial Ratio Analysis. 2013. http//www.demonstratingvalue.org/resources/financial-ratio-analysis (Accessed 2015-3-9)9 B. Barkin, TB Finance Manager, Bill Melinda Gates Foundation (personal communication, March 13, 2015)10 C, Basu. Four Basic Types of Financial Ratios Used to Measure a Companys Performance. 2015. http//smallbusiness.chron.com/four-basic-types-financial-ratios-used-measure-companys-performance-25299.html (Accessed 2015-3-9)11 J. K., Chabotar, Financial ratio analysis comes to nonprofits. The Journal of Higher Education, 1989.pp. 188-20812H, Tuckman, and C, Cyril. A methodology for measuring the financial vulnerability of charitable nonprofit organizations. Nonprofit and Voluntary Sector Quarterly20.4 (1991) 445-46013 J. Zietlow, Nonprofit financial objectives and financial responses to a tough economy.Journal of Corporate Treasury Management,2010,vol.3, no.3, pp. 238-248.14R, Kaplan. Strategic performance measurement and management in nonprofit organ izations. Nonprofit management and Leadership, 2001,vol.11, no. 3, pp.353-370.15 NAF. Analyzing Financial Information Using Ratios. 2014. https//nonprofitsassistancefund.org/sites/default/files/publications/nonprofit_financial_ratios_2013.pdf (Accessed 2015-3-10)16 H, Tuckman, and C, Cyril. A methodology for measuring the financial vulnerability of charitable nonprofit organizations. Nonprofit and Voluntary Sector Quarterly20.4 (1991) 445-46017 J,,K.,.Chabotar, Financial ratio analysis comes to nonprofits. The Journal of Higher Education, 1989.pp. 188-20818 NAF. Analyzing Financial Information Using Ratios. 2014. https//nonprofitsassistancefund.org/sites/default/files/publications/nonprofit_financial_ratios_2013.pdf (Accessed 2015-3-10)19 L., M. Salamon. The rise of the nonprofit sector.Foreign Affairs, 1994, pp. 109-122.20 M. Mckeever. Family Foundations Donor Advised Funds and Supporting Organizations as Alternatives to Private Foundations .1999. http//www.pgdc.com/pgdc/family-fou ndations-donor-advised-funds-and-supporting-organizations-alternatives-private-foundations (Accessed 2015-3-10).21 DCU. Charitable Planning Donor Advised Funds vs. Private Foundations. 2015. http//dcufinancial.org/new/dcufinancial/content.asp?contentid=2017940795 (Accessed 2015-3-10)22 Investorwords. Fixed Price Contract. http//www.investorwords.com/19291/fixed_price_contract.html (Accessed 2015-3-10)23 Business Dictionary. Cost reimbursable contract. http//www.businessdictionary.com/definition/cost-reimbursement-contract.html (Accessed 2015-3-10)24 Business Dictionary. Time and materials contract. http//www.businessdictionary.com/definition/time-and-materials-T-M-contract.html (Accessed 2015-3-10)25 P, Joskow K, Alvin. A framework for analyzing predatory pricing policy.Yale Law Journal,1979, pp. 213-270.26 R. Bate, K. Boateng.Drug Pricing and Its Discontents. 2007. http//www.aei.org/publication/drug-pricing-and-its-discontents/ (Accessed 2015-3-10)27 John,Chuang Sirbu, Marvin. P ricing multicast communication A cost-based approach. Telecommunication Systems, 2001, vol.17, no.3, pp. 281-297.28 T, T. Nagle, H.,,K., Reed.Strategy and tactics of pricing. Pearson Education Limited, 2013.29 S. Allen, Pricing Methods. 2015. http//entrepreneurs.about.com/od/salesmarketing/a/pricingstrategy_2.htm (Accessed 2015-3-9)30M., Zall.. The Pricing Puzzle. 2006. http//pubs.acs.org/subscribe/archive/mdd/v04/i03/html/03zall.html (Accessed 2015-3-10).31 R. Bate, K. Boateng.Drug Pricing and Its Discontents. 2007. http//www.aei.org/publication/drug-pricing-and-its-discontents/ (Accessed 2015-3-10)32 GSK Tiered pricing and vaccines. (2014) http//www.gsk.com/media/280905/tiered-pricing-for-vaccines-policy.pdf (Accessed 2015-3-13)