Operating Surplus / Deficit
Difference between total income and total expenditure in a period
What is Operating Surplus / Deficit?
Operating surplus or deficit is the difference between total income and total expenditure in a period. It shows whether an organisation is living within its means.
A surplus gives capacity to invest and build reserves, while a deficit uses up resources, so it is a basic measure of financial sustainability.
How this KPI is measured
- Function
- Finance
- Sub-function
- Financial Sustainability
- Industry
- All Industries
- Type
- Lagging
- Impact
- Financial control
- Unit
- $
- Measurement frequency
- Monthly / Quarterly / Annual
- Formula
- Total income − Total expenditure in period
How to calculate it
Subtract total expenditure from total income in the period.
For example, if income was 12,000,000 and expenditure was 11,400,000, the operating surplus is 600,000.
Exclude one-off items where they would distort the picture, and report the underlying result as well as the total.
Where it is used
Monitoring sustainability
See whether income covers costs.
Planning reserves
Build a buffer.
Reporting to boards and funders
Show financial position.
How to improve it
Tips and common mistakes
- Charities are not aiming for maximum surplus, but for sustainability.
- A deficit may be planned if it uses reserves for a purpose.
- Look at trends.
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