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Income and Expenditures of Business Chambers

Income and Expenditures of Business Chambers. Structures Character istics Opportunities. Workshop on 18 & 19.06.2004 in Dambulla CCICP, CCIUP, CPWCIC, MDCCI, NCHSL, PAEA. Income sources of chambers. Income. Membership fees. Services. Subsidies. Others. Membership fees. Income.

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Income and Expenditures of Business Chambers

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  1. Income and Expendituresof Business Chambers Structures Characteristics Opportunities Workshop on 18 & 19.06.2004 in DambullaCCICP, CCIUP, CPWCIC, MDCCI, NCHSL, PAEA GTZ - ESSP

  2. Income sources of chambers Income Membershipfees Services Subsidies Others GTZ - ESSP

  3. Membership fees Income Membershipfees Services Subsidies Others Big Enterprises Medium Enterprises Small Enterprises GTZ - ESSP

  4. Service Income Membershipfees Services Subsidies Others OfficeServices StrategicServices Information Training Counselling Support Authorized Services GTZ - ESSP

  5. Subsidies Income Membershipfees Services Subsidies Others Govern-ment National Donors InternationalDonors GTZ - ESSP

  6. Others Income Membershipfees Services Subsidies Others Interest Rent Others GTZ - ESSP

  7. Expenditure structure 1 Expendi-ture 1 Lobby Services Auto-Organization GTZ - ESSP

  8. Expenditure structure 2 Expendi-ture 2 Staff All others GTZ - ESSP

  9. The Finance Structures Calculated by the Chambers GTZ - ESSP

  10. Income Income sources of chambers Membershipfees Services Subsidies Others GTZ - ESSP

  11. Membershipfees Big Enterprises Medium Enterprises Small Enterprises IncomeMembership fees GTZ - ESSP

  12. Services OfficeServices StrategicServices Authorized Services IncomeService GTZ - ESSP

  13. Subsidies Govern-ment National Donors InternationalDonors IncomeSubsidies GTZ - ESSP

  14. Expendi-ture 1 Lobby Services Auto-Organization Expenditure structure 1 GTZ - ESSP

  15. Expenditures für Lobby and Service Lobby Services 100% 100% PAEA CPWCIC CCICP 80% 80% Business Club CCIUP NCHSL MDCCI MDCCI NCHSL Service Organisation CCIUP 20% 20% CCICP PAEA CPWCIC 0% 0% GTZ - ESSP

  16. Expenditure structure 2 Expendi-ture 2 No staff .... No service ! Staff All others GTZ - ESSP

  17. The Chamber as Business Club or Service Enterprise Staff Others 100% 100% Service Enterprise 70% 70% CCICP PAEA NCHSL MDCCI CPWCIC CCIUP CCIUP CPWCIC MDCCI NCHSL PAEA CCICP 30% 30% Business Club 0% 0% GTZ - ESSP

  18. 1 Income from Membership Fees GTZ - ESSP

  19. Membership Fees The total income from the memberships fees depend on Number ofmembers Membership fee system Paymentrate GTZ - ESSP

  20. 11 Number of members Do you want to increase the number of members? If yes, how? GTZ - ESSP

  21. Logic of the Development of Chambers of Entrepreneurs Lobbyin front of Government and other groups of the society Law of great number:the more members, the more influence Chamber ServicesInformation / ConsultationTraining / Support More means to finance more and better services More members pay more membership fees Higher attractiveness for Entrepreneurs More Entrepreneurs apply for membership GTZ - ESSP

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  28. 12 Membership Fee System Considerations about the Membership Fee System of Business Associationsand Chambers GTZ - ESSP

  29. Criteria for a Membership Fee System • It must be "fair" • It must generate sufficient financial meansto finance a big shareof the costs of the lobby and service work of the business association GTZ - ESSP

  30. What is "fair" ? • Membership fee system A :1 member 1 vote 1 membership fee amount • Everyone pays the same amount !The system is comparable with a "Poll Tax" GTZ - ESSP

  31. Under which conditions is this membership fee system efficient and fair? • All members are more or less equal • same size of the enterprises • same number of employees • same turnover and profit • In this case an identical amount as membership fee is fair, efficient and easy to manage GTZ - ESSP

  32. But what if the member enterprises differ very much ? • different size • different number of employees • different turnover and income • In this case the same membership feeis "unfair" and not efficient GTZ - ESSP

  33. Example • The membership fee is for all members 2.000 Rs per year • a bigger enterprise with 200 employees pays consequently 10 Rs per employee • a small enterprise with 5 employees pays consequently 400 Rs per employee • The burden through the membership fee is for the small company 40 times higher than for the bigger company !!! GTZ - ESSP

  34. This membership fee system has the effectof a barrier in order to keep out unwanted entrepreneurs, especially SMEs,from the business association • It is efficient for "Business Clubs" where selected "right" entrepreneurs want to remain among themselves GTZ - ESSP

  35. What is "fair" ? • Membership fee system B:The membership fee amount reflects the economical differences between the members Bigger companies pay a bigger share Smaller companies pay a smaller share • The financial burden through the membership fee is more or less equal for all members GTZ - ESSP

  36. The main questions … • Which criterion to use ? • How to define adequate categories ?(groups of member enterprises GTZ - ESSP

  37. The problem … • The more complex the membership fee system is • criteria : reliable access to data and control • categories : many • exemptions : many the more difficult it is to manage and the more it invites the members to manipulate their data GTZ - ESSP

  38. … but entrepreneursdo not like to publishfinancial data … … therefore normally notrecommendable! Criteria linked with the economic power of the member • Direct criteria • Turnover • Profit • Income tax payment … in addition : during an economic crisis the income of the chamber can decrease dramatically … GTZ - ESSP

  39. Usuallynot business secrets … therefore normally recommendable! Criteria linked with the economic power of the member • Indirect criteria • Number of employees • In case of a sector association :- Quantity of production or- Quantity of sold products The relatively stable employment of the enterprises guarantees a more secure income of the chamber GTZ - ESSP

  40. Categories of members • A membership fee system without categories • x Rs per Rs turnover / profit or x ‰ from the turnover /profit • x Rs per employee • Advantage : • Very exact and fair • Disadvantage : • Causes much administrative work because of permanent changes of the data to be queried GTZ - ESSP

  41. Categories of members • A membership fee system with categories • x Rs for turnover / profit up to a Rsy Rs for turnover / profit between b Rs and c Rs • x Rs for up to a employeesy Rs for between b and c employees • Recommendation : • maximally 10 classes • Advantage : • Causes limited administrative work because the data do not vary that much GTZ - ESSP

  42. Example for a membership fee system per number of employees GTZ - ESSP

  43. Differentiation between sectors • Perhaps it is necessary to differentiate between companies per sector • industry, agriculture, service • commerce • bank • They produce with the same number of employees considerable different economic results GTZ - ESSP

  44. Example for a membership fee system per employees and sector GTZ - ESSP

  45. Registration fee • When is a registration fee reasonable • Members invest in costly infrastructure for their own benefit • A new member, who wants to use it, shall later adequately participate in its financing • Examples : • Social and sport clubs, i.e. tennis, golf, etc. GTZ - ESSP

  46. Registration fee • What is the purpose of a registration fee of a business chamber or association • Except eventually an office building it does not have and need a costly infrastructure, because its tasks are lobby and service • It does not need a registration fee !!! • Registration fee charging chambers • Create an additional barrier around themselves • In order to keep entrepreneurs out !!! GTZ - ESSP

  47. Registration fee • Consequently, a registration fee for new members is highly contra-productive for the development of a chamber !!! Note: In Europe, America and Africa chambers and associations do not know registration fees. Only on a small island in Asia … GTZ - ESSP

  48. Some tricky points …one entrepreneur, more companies • In some countries entrepreneurs like to run a couple of smaller companies than one bigger one due to tax, organisational or marketing reasons. • As economically thinking persons they enter into the chamber only with one of these enterprises, preferably with the smallest one, using the lobby and service work for all of them. • Not good for the chamber! What to do? GTZ - ESSP

  49. Some tricky points …one entrepreneur, more companies • The best : They enter with all individual companies into the chamber • more members, more fees • The 2nd best : They enter with all individual companies and get x% discount for the 2nd, y % for the 3rd, etc., company • more members, still more fees GTZ - ESSP

  50. Some tricky points …one entrepreneur, more companies • The 3rd best : They enter with one company, but for the calculation of the membership fee the sum of employees of all companies is used • not more members, but more fees • The 4th best : They enter with their biggest company, not with the smallest • not more members, little bit more fees GTZ - ESSP

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