Cooperative Glossary

This glossary has been prepared to assist individuals and groups involved in developing and/or operating cooperatives. The glossary explains various terms and processes that are common in cooperative and general business practice. The glossary is a general guide and should be used with the Act, regulations, and appropriate legal, technical, and managerial advice and support.

Summary

Cooperative: A cooperative is an autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly owned and democratically controlled enterprise. Most cooperatives are registered under the Canada Cooperatives Act, and are operated according to the seven principles of co-operation which were endorsed by The International Co-operative Alliance in 1966 and revised in 1995:

The 7 Principles

1. Voluntary and open membership;
2. Democratic member control;
3. Member economic participation;
4. Autonomy and independence;
5. Education, training and information;
6. Cooperation among cooperatives; and
7. Concern for community.

Accountant	Qualified individual who carries out bookkeeping, auditing, and other financial reporting and analysis for the cooperative, who is a member of a recognized accounting professional association.
Accounts payable	Unpaid (outstanding) bills; money owed to suppliers for goods and services purchased for business operation.
Annual meeting	General meeting which all members are entitled to attend and at which they are entitled to vote. A cooperative must hold an annual meeting each year, and no later than six months after the end of its fiscal year. The first general meeting must be held within four months of the cooperative's date of incorporation.
Annual return	Form required setting out a list of current directors and other information; must be filed with the registrar within 30 days following the annual meeting.
Articles or Incorporation	Official document required for incorporation; states the cooperative's name, purpose, share structure, directors and incorporators.
Asset	Entire accumulated property of a cooperative that can be used to pay debts or expenses, including cash on hand and money owed by customers. Assets are those things a cooperative or business owns. See Current assets, Fixed assets and Liquid assets.
Audit	Annual financial examination of a cooperative; conducted by an independent firm of accountants whose report is in a form acceptable to the cooperative's financial institution and its members.
Auditor	Qualified individual (or firm) who prepares the annual financial statement; must be independent of the cooperative; appointed at the cooperative's first annual general meeting and each subsequent annual general meeting. Cooperatives with fewer than 20 members may, at a general meeting, resolve not to appoint an auditor.
Balance sheet	Statement of what a cooperative owns and what it owes at a given time. The difference between its property (including cash) and its debt is shown as its net worth.
Board of Directors	Body elected by the members to direct the business, policy and operations of a co-op; all members could be on the board, but usually the membership is too large to meet to consider all decisions. See Executive committee.
Break-even point	Level of sales or production needed to show neither income nor a loss.
Business plan	Guide for managing the cooperative, setting its organizational structure, determining necessary shares/capital, obtaining financing, identifying necessary facilities and equipment, and measuring progress.
By-laws	Statement of a cooperative's aims, objectives, and rules of operation. Must be approved by membership and may be amended as necessary. Proposed by-laws must be in accordance with the Canada Cooperatives Act. See Certificate to Accompany By-laws.
Capital	Total funds invested in a cooperative to enable it to conduct business.
Cash flow	Amount of money left in a given period after all income is accounted for and all cash expenses, after taxes and before depreciation, are paid. See Negative cash flow.
Cash poor	Financial condition when a profitable cooperative has little cash on hand (for reasons such as rapid expansion), so it cannot be supported by operating income alone.
Certificate of Incorporation	Legal document issued when incorporation has been approved. A cooperative legally comes into existence on the effective incorporation date stated on this certificate.
Certificate to Accompany By-laws	Document certifying the authenticity of by-laws to the registrar; must accompany proposed by-laws when a cooperative applies for incorporation; must be signed by the president and secretary on behalf of the cooperative's board. See By-laws.
Consumer cooperatives	Buy goods in bulk and sell them at competitive prices; examples are retail co-ops, direct charge co-ops, and buyers' clubs.
Co-operation among cooperatives	Cooperatives working together to strengthen and promote the Cooperative sector, and to avoid duplication of services. See Cooperative principles.
Cooperative	A legally incorporated organization that is developed, owned and controlled by and for its members. Established to provide members with goods or services, or to make joint use of available resources to improve members' social or economic conditions.
Cooperative principles	Seven guidelines for cooperative philosophy and business practice; endorsed by The International Co-operative Alliance in 1966 and revised in 1995: 1) Voluntary and open membership, 2) Democratic member control, 3) Member economic participation, 4) Autonomy and independence, 5) Education, training and information, 6) Co-operation among cooperatives, and 7) Concern for community.
Cooperative Securities Board	Board consisting of not more than five members appointed by the Lieutenant Governor in Council; reviews and approves the issuing and management of securities by cooperatives. See Security.
Cost of sales or cost of goods sold	The direct costs of acquiring and/or producing an item for sale, or of providing a service, without counting overhead costs.
Creditors	Persons or organizations (such as suppliers and lenders) to whom money is owed.
Current assets	Cash, plus property to be sold or converted to cash within one year.
Current liabilities	Debts that will be paid within one year.
Democratic control	One vote per member regardless of equity; members have a duty to participate in the cooperative's decision-making process. See Cooperative principles.
Depreciation	Amortization of assets (machinery, buildings, equipment) that wear out or lose value over time.
Disbursements	Money paid out by a cooperative to its suppliers and other creditors to cover operating expenses.
Education	Education of members and elected officials in cooperative principles and practices to ensure understanding of roles and responsibilities. See Cooperative principles.
Employment cooperatives	Provide employment to the worker-members who produce and/or market their goods or services through the cooperative; examples include bakeries, janitorial services, and printing/publishing plants. Also called Worker cooperatives.
Equity	The difference between the value of assets and liabilities.
Equity capital	The investment in a cooperative that represents member ownership, usually expressed in common shares owned by members.
Executive committee	The board of directors usually delegates some responsibilities, especially operations/management issues, to an executive committee typically consisting of a president, vice-president, secretary and/or treasurer. See Board of directors.
Financial cooperatives	Provide a variety of financial services such as savings, investments and loans; examples include credit unions, insurance and trust cooperatives.
Financial statements	Typically consist of a balance sheet, income, expense and operating statements.
Fixed assets	Usually real property or depreciable materials. Buying or selling fixed assets can increase or decrease a cooperative's worth.
Fixed expenses	Predictable and firm expenses that are generally ongoing, such as building and equipment rental, utilities and salaries.
Forecasting	Predicting how many units of product or service will be sold in a given time frame, at what cost to the cooperative, and at what price to the buyer, in order to calculate the financial, material and human resources required to produce the goods or provide the service.
Gross income	The sales income of a cooperative before expenses, depreciation and taxes are deducted. See Net income.
Income	The total cash coming from a variety of sources such as customer payments, interest, tax credits, dividends and bonuses.
Income and expense statement	A report detailing the source and amount of all income and the total costs to a cooperative, organized and displayed in sub-headings, that can be compared month to month, season to season, or year to year.
Incorporation	Legal formation of a cooperative; requires submission of an incorporation package (containing the Articles of Incorporation, a Notice of Registered Office, and a proposed set of by-laws) to the Registrar of Cooperatives. See Articles and Certificate of Incorporation.
Inventory	Manufactured but unsold stock, on-hand and available for sale immediately.
Invested share capital	The money that shareholders/members put up initially to start the cooperative.
Legislation	See the Canada Cooperative Act for current federal legislation and the Acts it replaced.
Liabilities	Immediate and future financial obligations to creditors/depositors/members that expand and contract with sales success of a product or service. See Current liabilities and Long-term liabilities.
Limited interest shares	Shares are used to raise capital for a cooperative, rather than to generate a large return on investment for members. See Cooperative principles.
Liquid assets	Cash, plus property that can quickly and easily be sold for cash.
Liquidity	The total value of assets that are readily convertible to cash.
Long-term liabilities	Debts that will not be paid off within one year.
Losses	The amount of money by which expenses exceed income.
Market	The potential buyers of a product or service, determined by geographic, economic, social and other characteristics.
Market analysis	The process of identifying potential consumers of a product or service, the size of the group, and the percentage of the market that could be captured, considering costs and competition.
Marketing strategy	Strategy to make potential customers/members aware of a cooperative's goods and services; includes promotion, publicity, advertising and sales.
Marketing cooperatives	Cooperatives established to support members' efforts to sell their products; examples include agricultural cooperatives.
Member	An individual who has met the conditions of membership stated in the by-laws, and has been accepted as a member by the board of directors of a cooperative.
Membership	Membership in a cooperative must be voluntary and open, without discrimination, to anyone who can use its services. See Cooperative principles.
Negative cash flow	Financial condition when expenses are greater than cash income, and additional funding is needed. See Cash flow.
Net income	Income left after expenses, depreciation and taxes are deducted. See Gross income.
Net worth	The difference between the value of assets and liabilities of a cooperative.
Operating costs	Expenses incurred in conducting activities ordinary and necessary to the operation of a cooperative.
Patronage refund	Net savings are reinvested in a cooperative or are returned to members as patronage dividends, which may be in the form of cash and/or additional shares in the cooperative. See Cooperative principles.
Producer cooperatives	Cooperatives owned by producers for their mutual benefit; examples include dairy, feeder, film, fishery, handcraft and worker (employment) cooperatives.
Refund	See Patronage refund.
Registrar of Cooperatives	Official appointed to oversee regulation and carry out regulatory duties set out in the Canada Cooperatives Act. Maintains register of cooperatives. Collects, approves, issues and files legal documents related to the registration, incorporation and operation of cooperatives.
Registration	Official record in the province/territory's legal registry that an organization has been incorporated as a cooperative.
Revenue	The total income a cooperative receives from all sources.
Request for Name Search and Reservation	Document requesting confirmation that the name chosen for a cooperative is available and may be used. Must be submitted to Corporations Canada before submission of incorporation documents.
Rochdale	A small group of people known as the Rochdale Pioneers established a retail cooperative in Rochdale, Lancashire, England in 1844. The policies and methods of developing and operating their cooperative enterprise became the foundation of current internationally-endorsed principles. See Cooperative principles.
Sales forecast	A prediction of the number of units of product or service a cooperative will sell within a specified time period and at a given price.
Security	Share or debt obligation of a cooperative to its members; includes a certificate stating the nature and amount of the share or debt obligation. See Cooperative Securities Board.
Service cooperatives	Provide needed services, generally at improved quality, price and availability; examples include health care, child care, cablevision, farm machinery, housing and transportation cooperatives.
Share	One of the equal parts into which a cooperative's capital is divided.
Start-up	The initial period of operation of a co-op or other business or service, usually the period before the enterprise begins receiving income.
Start-up capital	The total amount of money, resources and property that a cooperative needs to begin operating and to support it until income is received.
Statement of income	A summary report of all forms of income generated over a specific period including sales, tax credits, dividends and receivables.
Target market	A very specific group of potential customers, usually defined by one or more of: age, lifestyle, gender, socio-economic position, income, geography, needs and interests, etc.
Types of cooperatives	Five categories when classified by function. See Consumer, Financial, Marketing, Producer and Service cooperatives.
Variable costs	Expenses that vary with the volume of good or service provided by a cooperative.
Worker cooperatives	See Employment cooperatives.
Working capital	The difference between current assets and current liabilities.

• Where to start

Prepared by: Saskatchewan Regional Economic and Co-operative Development