Posted in Finance, Accounting and Economics Terms, Total Reads: 39
Definition: Sustaining Activity
Sustaining activity is any activity which does not directly contribute to the functioning of the organization or to the revenue generation part of its operations but is necessary to be carried out in order to survive and sustain the organization.
These activities might seem trivial as people tend to overlook it and gauge it with the fact that this won’t impact any change in the profit margins directly, however, the indirect losses are only so much that they become very essential.
The majority of the employees working in the organization view it as a cost center majorly as no revenue generation is expected from there but lot of funds go into continuing it. As the name suggests, this is not an optional activity, it is but absolutely essential to continue this activity.
For example: Security in any organization is viewed as a cost center because no revenue is generated from the security team and costs go into the maintenance and upkeep of the organization and the salaries of the employees working in the security department. However, this is an absolute essential thing to do as the company cannot function without the services of the security. So, security is a classic example of a sustaining activity.