Позитивные изменения, Том 3 №1, 2023. Positive changes. Volume 3, Issue 1 (2023)

Все коэффициенты находятся в пределах нормативных значений. Компания в текущем периоде попадает в первый класс экономической устойчивости (S = 1).

ОБЛАСТЬ ПРИМЕНЕНИЯ МЕТОДИКИ

В случае самооценки данная методика рекомендована к применению в первую очередь социальным предпринимателям на любой стадии развития организации. Она позволит понять стабильность их экономического положения и его изменение с течением времени. Методика является подспорьем для выработки решений, укрепляющих экономику предприятия. Также данные коэффициенты для самооценки могут использовать и любые коммерческие организации как базовую часть финансового анализа их бизнеса.

С другой стороны, данную методику могут применять грантодающие организации для оценки потенциала участников конкурса грантов, с использованием процедуры экспертного оценивания. Запрос данных по бухгалтерскому балансу позволит выбрать более устойчивые экономически организации на предварительном этапе и сократить риски реализации проекта по экономическим причинам. Безусловно, оцениваться полноценно могут только заявители, имеющие бизнес-модель в своей деятельности. В случае некоммерческих организаций, не имеющих в своей структуре деятельности бизнес-модели, данная оценка не применима.

The Union of Business and Money. Evaluation of the Economic Sustainability of Social Entrepreneurship Projects

In the fall of 2022, the Social Projects Support Fund commissioned the development of a model for evaluating the impact of social entrepreneurship projects. An expert group of the model authors from the Positive Changes Factory, the Gladway Foundation, and other organizations suggested including an “economic sustainability” component alongside “social impact” and “relevance of the problem addressed.” Ten social enterprises participated in testing the model. In this material, we will present the essence of the evaluation of economic sustainability of the projects proposed under the model developed, and why its methodology can aid in making the right decisions.

Elena Avramenko

Expert of the project “Development of a Social and Economic Impact Assessment Model for NGOs” by the GLADWAY Foundation, Lean 6 Sigma Green Belt master

A HARMONIOUS UNION

Social entrepreneurship should ideally be a harmonious union between an effective solution to an important social problem and a sustainable business model. An organization can only manage change and make a positive impact on the society if it has constant and reliable financial resources. In light of this, financial analysis of your commercial activities is an important components of success. By looking at the dynamics of financial performance from year to year, a company can understand the strengths and weaknesses of its management, and therefore can plan and improve performance over time. That is why the experts decided to add an economic sustainability indicator to the model being developed.

The need to evaluate economic sustainability and financial performance of a social enterprise is evidenced by the success stories of Western companies offering social impact consultancy services (see Figure 1). For example, JBJ Consult (Switzerland) provides evaluation of profitability, self-sufficiency, return on investment and other financial indicators, making sure their clients’ businesses yield both financial and social return. Another example is the Monitor Institute by Deloitte, which works with social impact organizations to improve their impact and managerial performance, and to optimize resource utilization.

Figure 1. The Use of Economic Indicators in Evaluating Social Entrepreneurship in Western Countries (Based on Evolution & Philanthropy Research Organization)1

* – relevant for institutional investors who want to start with a pilot, to assess risk

THREE KEY INDICATORS

The economic stability indicator formula is based on the principle of accessibility and unambiguity of the data used: when compiling the evaluation model, the authors indicated specific locations in the accounting balance sheet where the respective indicators can be obtained. Therefore, it is no longer necessary to describe the economic component in terms of risks and in the context of investment, as suggested by SROI and IMP methodologies. These methodologies require using not just accounting, but econometric analysis methods, which may not be available to a wide range of social entrepreneurs. The scale and scope of most social entrepreneurship projects does not require hiring an expert in computational methods in economics and/or the social sciences.

That is why easily accessible indicators were chosen for this model, which reflect the economic effectiveness component of the social enterprise, and which every enterprise can calculate without going too deep into complex analysis methods.[34 - Evolution & Philanthropy ANO. (2014). Evaluation of social impact for social entrepreneurship. Discussion of the research project, approaches and prospects. Workgroup presentation. Retrieved from: https://ep.org.ru/wp-content/uploads/2015/02/SE_social_results_2014.pdf. (accessed: 21.02.2023).]

The proposed evaluation of the organization’s financial condition uses such ratios as current liquidity, financial sustainability and return on sales, based on figures that can be found in the standard accounting statements.

1. Current liquidity shows whether the organization has enough working capital to cover its current liabilities as they fall due.

2. Financial sustainability shows the degree of the organization’s dependence on external funding and helps predict its solvency in the long run.

3. Return on sales is a comprehensive measure of the efficiency of material, labor and monetary resources utilization. A decrease in this figure means either a decrease in sales or inefficiency of economic activity.

These three indicators were chosen in the methodology as the key to analyzing the financial performance of the social enterprise, demonstrating how efficiently it is managed economically over several aspects. Current liquidity shows financial reliability and sustainability of the organization in the short run (ability to pay bills within a year). The financial sustainability ratio shows the capital structure – this indicator describes long-term financial reliability and the ability to meet its obligations in the long run. It is important for a social enterprise not to become overly indebted. Return on sales shows managerial efficiency, proper estimation of revenues and expenditures and cost control.

The influence of each indicator on the final score is based on the assigned weight (see Figure 2):

Current liquidity – 0.4;

Financial sustainability – 0.3;

Return on sales – 0.3.

Figure 2. Indicator weights in calculating economic sustainability

The weight ratios between the three indicators are close, but the current liquidity is given a somewhat larger weight. The standard level of the current liquidity ratio means the organization has a reliable financial position in the current year, and therefore can improve the other two indicators for the year. If, however, the organization cannot cover its liabilities in the current year, the prospect of long-term reliability and efficient distribution of current revenues and expenditures does not warrant complete protection against the bankruptcy risks.

The final formula for the economic sustainability indicator is obtained as a weighted total of current liquidity, financial sustainability and return on sales according to the following formula:

Economic stability = 0.4 * Current liquidity + 0.3 * Financial sustainability + 0.3 * Return on sales

INDICATOR FORMULAS AND DEFINITIONS

1. Current Liquidity (CL) is the ratio of the value of short-term assets (STA) to the value of short-term liabilities (STL) of the social enterprise.

CL = STA / STL

Short-Term Assets (STA) are company property, receivables, and other items that are involved in income generation: for example, cash in bank and on hand, accounts receivable, inventories, raw materials, deposits in banks, stocks and bonds of other companies. Short-term assets are consumed or sold in less than a year.

In the balance sheet form, short-term assets are reflected in the following lines (see Table 1).

Table 1.  Types of current assets in the balance sheet form

Short-Term Liabilities (STL) are debt obligations of the enterprise maturing within one year. Short-term liabilities of the organization include: accounts payable (short-term obligations to pay suppliers for the goods delivered, obligations to buyers in case of down payment for products, obligations to other creditors), short-term bank loans, taxes and wages payable.

In the balance sheet form, short-term liabilities are reflected in the following lines (see Table 2).

Table 2.  Short-term liabilities in the balance sheet form

The essence of the Current Liquidity ratio is that it allows you to determine whether the organization has enough working capital to cover its current liabilities as they fall due. The CL indicator helps evaluate the organization’s solvency.

STANDARD INDICATORS:

The standard optimal value of CL is in the range from 1.5 to 2.5, depending on the industry. The current liquidity ratio of 3 and above indicates an unreasonable capital structure and slower turnover of funds invested in inventories.

2. Financial sustainability (FS) is the ratio of Shareholders’ Equity (SE) to liabilities on Borrowed Funds (BF).

FS = SE / BF

Shareholders’ Equity (SE) is the value of all non-monetary and monetary property owned by the company, less the value of all its outstanding liabilities.

The shareholders’ equity is calculated using a simple method: just take the sum total of line 1300 of the balance sheet.

Detailed breakdown of the shareholders’ equity is given in the balance sheet in the following lines (see Table 3).

Table 3.  Shareholders’ equity in the balance sheet

Borrowed funds (BF) are the property and money of third parties raised by the company for a certain period of time for use in its activities, subject to a payment of interest.

In the balance sheet, there are two lines reflecting borrowed funds: line 1410 “Borrowed funds” and line 1510 of the same name.

The essence of the Financial Sustainability ratio is that it shows the degree of dependence of the organization on external funding and helps predict its solvency in the long run.