Financial Management in Nonprofit Organizations - Discuss financial management in nonprofit organizations and write an essay that compares and contrasts the application of financial management techniques in nonprofit and for-profit organizations. Sources of funds, use of debt, performance evaluation (efficiency in use of contributions and meeting the organization’s objectives), governance mechanisms in non-profits, etc. would be good topics/issues for discussion in the essay.
In order for any organization to be successful, it is imperative that a very strong financial management program exists and be managed properly. In nonprofit organizations, a strong financial management program is the most critical step in success of the
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A good manager will ensure that the sources coming in will be allocated in the areas that it’s intended for. “Budgeting and cash management are two areas of financial management that are extremely important exercises for not-for-profit organizations. The organization must pay close attention to whether it has enough cash reserves to continue to provide services to its clientele. Cash flow can be extremely challenging to predict, because an organization relies on revenue from resource providers that do not expect to receive the services provide. It is difficult to forecast contribution revenue in a reliable manner from year to year, for that reason; the control of expenses is an area of increased emphasis. Budget therefore becomes a critical activity for a not-for-profit” (Blackbaud). Budgets in a nonprofit organization are the snapshot of the organizations projection of received resources or financial support and its expenses or money going out. It creates a direction in which the organization goes in by allocating the resources received and maximizing them to ensure it serves the purpose of the organization. The budgets identify variable costs, fixed costs and mixed costs. Variable costs are the costs that are associated with the nonprofit organization and changes on a consistent basis. Those costs include, but are not limited to,