Financial Management in Nonprofit Organizations Essay

Financial Management in Nonprofit Organizations - Essay Example urban, sub-urban, rural area. Most of the non-profit organizations are small in size. For-profit organizations are basically profit motivated. They do not depend on funds or donations but depend on other sources like loans, debentures, ventured capital and leasing among others. The accumulated profit is divided among the stockholders themselves rather than investing it in the company. Both the organizations have their own mottos and goals. The paper intends to discuss the financial management in the non-profit organizations. Also, the study aims to compare the management of finance in non-profit organization with that of for-profit organizations. The different head under which the classifications are made include sources of funds, use of debts, performance evaluation, and utilization of funds and governance mechanism. This investigation also comprise of a dedicated concluding section along with certain recommendations. Table of Contents Executive Summary 2 4 Introduction 4 Comparison and Contrast of the Application of Financial Management Techniques in Nonprofit and For-Profit Organizations 5 Sources of Funds 5 Performance Evaluation for Non-Profit Organizations and Profit Organizations 7 Use of Debts 8 Governance Mechanism In Non- Profit Organizations 9 Utilization of Profit Earned 10 Conclusion 12 Recommendations 13 References 15 Introduction Financial management primarily refers to proper planning or management of activities of an organization for its smooth operation. In other words, the economic management of an organization to achieve the desired objectives is termed as financial management. Essentially, it is the technique of proper utilization of resources so as to achieve the preferred targets. Financial management includes the financial evaluation, financial planning and financial control. Financial planning entails future planning that assists in identification and management of risks and threats. It is generally the judgment of the performances of t he organization (Economy Watch, 2010). Non-profit organizations are those that utilize the raised funds to achieve the organizational goals rather than distributing or sharing among themselves. The objective of non-profit organizations is to achieve the set goals rather than achieving profit. Non-profit organizations generally ignore profit distribution. Non-profit organizations are also referred as the voluntary organizations as they provide primarily charitable services towards their stakeholders. However, for-profit organizations significantly vary from non-profit organizations. For-profit organizations, as the name signify, primarily desires to earn profit. The decision totally depends on the management if they want to retain the total profit with them or would like to spend sum on the operations of the organization. Generation of profit is the basic motto of for–profit organizations. There are basically four categories of the enterprises, i.e., sole proprietorship, partn ership, joint venture and company that come under for-profit organizations (Porter & Norton, 2010). Comparison and Contrast of the Application of Financial Management Techniques in Nonprofit and For-Profit Organizations Financial planning consists of proper strategizing in relation to financial aspects and its implementation. Financial planning of an organization depends on its objectives. The objectives of both non-profit and for-profit