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 the 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, partnership, 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
Financial Management In Non- Profit Organizations Executive Summary Non-profit and For-profit organizations vary with each other in terms of a number of aspects. Both the organizations play important roles but with different motives. Non-profit organizations play a very important role as it renders service without any profit…
Majority of non-profit hospitals in the United States are affiliated with a religious denomination and generally follow conventional means of offering medical care services. Non-profit hospitals are considerably different from government owned public hospitals and private for-profit organizations with regard to their features and functions.
The researcher discussed various issues related to the financial systems of both types of organizations. The issues that the researcher discussed included sources of funds, use of debt, and organizational objectives. The researcher made use of online resources and journal articles to find support from literature.
Nonprofit organizations have several ways of raising funds and they utilize debt as a secondary resource when compared to profit organizations that leverage through the usage of debt and most of them now consider it the primary source of raising funds. Accounting treatment for both the types differ and there is a certain degree of restriction is the usage of assets by the nonprofits.
For example donations to the nonprofit organizations are tax deductible. Apart from that, the organizations are exempted from paying any taxes. This kind of tax exemptions are at heart of the strength for a nonprofit organization. In fact the source of the strength of the nonprofit organizations comes from such tax exemptions.
Financial accounting records are mainly therefore for external purposes whereas managerial accounting records are maintained for the internal purpose- the controlling of costs, budgets, schedules during the given financial year.
"In the last few years the question has arisen as to how far the business-oriented concepts of management accounting and control could be employed for non-profit organisations (especially in the field of public management).
In order to provide both a general and specific perspective, examples of different profit-for and nonprofit organizations have been given and specific examples of financial management techniques used by Save the Children US have been given. The analysis has
on, Salamon (1992) reveals that any profit or gain made by the organization is used back by the organization in achieving its organizational objectives and or purposes rather than distribute it to any of their members. This paper discusses the characteristics of non-profit
The benefits of many non-profit organizations include service to the community via low-cost centers as well as bringing awareness to certain issues of significance and attract a host of other people sharing a similar course (Shaffer, Deller and Marcouiller,
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,
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