Provide additional reasons cash flow is important or suggest another approach or perspective
Read the posts of your peers and respond to at least one. Provide additional reasons cash flow is important or suggest another approach or perspective on conducting a cash-flow analysis. As you did in your initial post, use your research to support your claims and be sure to cite your sources according to APA guidelines.
Student post down below:
Weikart et. al, expressed that “costs are often classified into direct costs and indirect costs for costing purposes” (2013). Direct costs are associated with service, project, programs or activities for example costs related to project staff and project-related supplies, consultants, travel, and training. On the other hand, indirect costs are not easily identifiable but they are typically related to executive salaries, rent or mortgage payments, utilities, finance, and legal services (Weikart et. al, 2013).
With that in mind, the different approaches used to estimate direct and indirect costs are tied in with costing services such as departments and support centers. Departments or program centers deliver services directly such as soup kitchens or job training departments. Support services centers include administration and fundraising factors. Another approach is using the sum of the direct and indirect costs to determine the total or full cost of a cost objective. As Weikart et. al. stated that nonprofit organizations should know the full costs of their services for internal cost control and external reimbursement and reporting purposes as mandated IRS Form 990 (2013).
Other approaches include the pool or common and the base or criterion which are critical in allocating indirect costs while the base approach is the criteria upon which the pool is allocated. When using the pool approach to determine costs, the idea of occupancy costs such as rent, utilities and maintenance while the base approach consist of the percentage of square footage that each department occupies. It is also important to keep in mind that the allocation of salary may be linked to direct cost even though for each department it may be used as a base, factoring in the time spent in running the department. It is also emphasized that other methods can be used in allocating indirect costs, even though it is highly recommended that consistent use of the same base is applied (Weikart et. al, 2013).
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