Financial analysis of community-based forest enterprises with the green value tool

Abstract

The Green Value tool was developed in response to the need for simplified procedures that could be used in the field to conduct financial analysis for community-based forest enterprises (CFEs). Initially our efforts focused on a set of worksheets that could be used by both researchers and CFEs to monitor and analyze costs and income for one production period. The original worksheets were designed and tested for CFEs producing timber in Brazil. Since then, the worksheets have been further developed and incorporated into the Green Value tool, which includes a User’s Guide that leads users through a six-step financial analysis process and a facilitator’s guide for training workshops. In 2013, the tool was used to train 99 representatives of CFEs and organizations that support CFEs and to analyze a range of CFE products and production scales. The tool helps CFEs monitor and analyze costs by major productive activity as well as administrative activities, and the results provided include the subtotal cost per activity and per type of input (labor, materials, machinery), total cost, average cost per unit sold, net income, and rate of return. These results are useful in helping CFEs to understand their costs, to identify ways to reduce costs or improve efficiencies, to evaluate scenarios, to provide transparent financial reporting to communities and donors, and to potentially secure finance. In addition, the results help inform policy makers and others working to support CFEs on the financial challenges CFEs face as well as the financial benefits they provide local communities through wages and purchases of materials and services.