StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...

Financial Management in Nonprofit Organizations - Essay Example

Cite this document
Summary
CUSTOMER’S NAME COLLEGE NAME Semester Executive Summary There has been a debate on the contrasting methods being adopted by nonprofit organizations (also known as not for profit organizations) for financial management. These methods have some resemblance in their structure with the methods of conventional finance, yet they differ in their applicability…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER95.1% of users find it useful
Financial Management in Nonprofit Organizations
Read Text Preview

Extract of sample "Financial Management in Nonprofit Organizations"

Download file to see previous pages

Several performance measure indicators are also discussed and they have a deep co-relation with how the initial funds are generated. Performance indicators of both the types differ slightly but this is the only aspect in which most general finance principles can be applied to both. Finally, we looked at how corporate governance is ensured for nonprofits yet they lack in strong monitoring as the real focus of government, agencies and creditors is on how for – profits are performing. Financial Management in Nonprofit Organizations Financial Management for nonprofit organizations has many similarities with the financial management practices being adopted by profit organizations yet it differs in some respects.

Maximization of Shareholder’s wealth and return on investment are the key performance indicators for a ‘for-profit’ organization. However, as far as a not for profit organization is concerned, the key emphasis is on developing the welfare projects of the society by contributing in one form or the other. Major stakeholders of a not for profit organization are not entitled to any wealth maximization. . This actually leads to the definition of the mission statement of a not for profit organization (Blackbaud, 2011).

The disclosure and administration activities of a nonprofit organization must be scrutinized; therefore the working staff must be accountable for every incoming dollar. This is for donor’s satisfaction and for the transparency of the management processes (Cass, 2010). Fund accounting system has become even more critical considering an increasing shift in the importance of external financial reporting (McFarlane, 2012). Therefore, budgeting and cash flows management are of immense importance in a not for profit organization’s financial management setup.

Liquidity and asset management is important too since commitments of servicing are to be continued over an extensive period of time. Cash Flow prediction becomes challenging due to two main factors. Primarily, operational cash flows are negative and financial cash flows are not certain. Another reason for this unpredictability is the fact that cash flow donors aren’t the ones who are receiving services or any other advantage on their investments. Severe management crisis can be an outcome of a demand increase in the resources of the nonprofit organization.

Accounting control also becomes important since the forecasted revenue is unreliable and that’s the reason why not for profit organizations are not inclined in servicing newer clients until they have done a thorough research on that. With control comes budgeting, thus, a not for profit organization requires risk averse financial managers and tactical marketers. Sources of Funds Nonprofit organizations utilize a method known as fund accounting for maintaining books pertinent to the received resources by

...Download file to see next pages Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Financial Management in Nonprofit Organizations Essay - 2”, n.d.)
Retrieved from https://studentshare.org/finance-accounting/1460876-financial-management-in-nonprofit-organizations
(Financial Management in Nonprofit Organizations Essay - 2)
https://studentshare.org/finance-accounting/1460876-financial-management-in-nonprofit-organizations.
“Financial Management in Nonprofit Organizations Essay - 2”, n.d. https://studentshare.org/finance-accounting/1460876-financial-management-in-nonprofit-organizations.
  • Cited: 0 times

CHECK THESE SAMPLES OF Financial Management in Nonprofit Organizations

Challenges to Nonprofits

The researcher of this paper highlights that for several nonprofit organizations, the art of making tradeoffs is a condition of continued existence as well as a key component of success.... Considering the significance of these choices, it is worrying that the financial systems in many nonprofit organizations aren't designed to support either short-term or long-term strategic decision making.... While most nonprofit organizations have a good comprehension of the direct costs incurred by their programs, many don't account for indirect costs....
9 Pages (2250 words) Case Study

Managing non-profit organizations

Program planning makes available input to many other functions, such as resource planning (regarding staff, funds, and people), financial management, advertising and promotions, and also fundraising.... In some countries, these organizations also look for tax… These organizations include Red Cross, habitat for humanity and WWF (Redmond).... A nonprofit organization or a not for profit making organization, as the name suggests, is a one that does not redistribute the surplus of income over expenditure....
5 Pages (1250 words) Research Paper

Managing Nonprofits

The tendency to be business oriented has increased rapidly as more and more nonprofit organizations feel that corporate type of efficiency is the ideal way to move forward.... Moreover, the notion that the nonprofit organizations should operate This paradigm shift has resulted in certain perceptions that question their integrity, their mission and purpose as well as their role in the society.... As more and more nonprofit organizations are adopting the approach, there is a need to redefine their roles and approach towards the society....
15 Pages (3750 words) Research Paper

Critical Issues in Non-Profits

The concept of philanthropy is further categorized into many areas… nd one of the foremost areas which, today, are highly regarded because of its efforts to make this world a better place for everybody, are the nonprofit organizations.... The stakeholders of nonprofit organizations do not look at the financial statements at the end of the day as they do not expect profit from their investment, rather the money they get into the organization is all spent on the social welfare activities (Boris, 2013)....
8 Pages (2000 words) Coursework

Nonprofit organizations

‘Strategic performance measurement and management in nonprofit organisations'.... (2004) ‘Doing things right: effectiveness in local nonprofit organizations, a panel study'.... Non-profit making organizations are those which are not in operation with the aim of direct or indirect individual or organizational gain or profit (Salamon, 1992).... This paper discusses the characteristics of non-profit Characteristics of Non-Profit organizations Non-profit making organizations are those which are not in operation withthe aim of direct or indirect individual or organizational gain or profit (Salamon, 1992)....
2 Pages (500 words) Essay

Financial Management in Not-for-Profit Organizations

This paper focuses on financial management in… nonprofit organizations and subsequently offers a comparison and distinction between the application of financial management techniques in nonprofit and for-profit organizations.... In achieving this, this paper focuses on the sources of funds, use of debt, performance evaluation, Due to the soaring or not-for-profit organizations, there has been the need for the implementation of financial management mechanisms to ensure that grants of funds from donors are used for their intended purposes....
8 Pages (2000 words) Essay

Governmental Accounting (09/26)

Effective financial management in Public and Nonprofit Agencies.... This exemption enables nonprofit organizations pursue activities not be suitable for profit making organizations.... he remaining agenda which has not been dealt with by FASB on not-for profit making organizations' financial reporting is the standard-setting project, which can be used to improve the current net assets classification scheme and the information provided in nonprofit's financial statements and notes in regard to an organization's financial performance, liquidity and cash flows....
2 Pages (500 words) Essay

Elements of Governance Reform

ajor failure in accountability and disclosure of few leading nonprofit firms and penetrated media coverage of this failure by nonprofit organizations cast the nonprofit sector in an unethical and unfavorable light.... This also damaged the integrity and trust of people across the world on the nonprofit organizations along with the benefit of the nonprofits organizations.... Although most of the provisions of Sarbanes Oxley Act have currently been applied to only publicly traded companies but nonprofit organizations could benefit by adopting these provisions....
2 Pages (500 words) Coursework
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us