Financial Management in Nonprofit Organizations



Financial Management in Nonprofit Organizations

Introduction

No profit organizations are hardly analyzed and assessed from financial management point of view. Rather these are assessed on the basis of services provided to sicety and community. These organizations are judged on the basis of their work and contributions to the society. However, more recently it has been analyzed that quality and standards of not for profit organizations can eb improvised and enhanced by improving its financial amangement related activities because the effectiveness of managerial practice relys on the effective financial management practices as well. One of the main hinderence observed in lack of efficiency of these organizations is wwidening gaps between financial amangement an primary managerial practices and the low limits set by the public an dprivate funding resources pertaining to administrative, managerial, and other expenses. One has to efficiently allocate the funds received in form of grants, and donations. This results in vulnerabilities for not for profit organizations and results in liquidity issues. Liquidity mismanagement severely affects the day to day operations of the company such as paying utility bils, salaries, current debts, interest obligations etc. That is why the management of not for profit organizations are required to focus more on risk amangement, allocation of funds, reserves amangement, surviving liquidity crises etc. instead of focusing on long term strategic plans in order to improve its standards and quality of management. The analyss and researchers have highlighted the importance of financial management and it is proved so far that inadequate allocation of funds and mismanagement may lead the not for profit organizations to have distorted effects on organziation's infrastructure (Burd and Kotloff, 2012).

Discussion

Financial Management in Non Profit organizations

The adequate level of financial management is achieved when the information provided in the financial statements, budgets, accounts, can be used to predict the future operations and trends of the organization and help in attaining financial and non financial objectives of the organization. The main purpose of a financial plan is to ensure the availability of adequate level of funds, preparation of budget, make sure that there is balance between cash inflow and outflow, facilitate suppliers and investors of funds to business to keep up the cash inflow stable over long term. Financial plans help in determining the scope of expanding and growing company's operations in long and short term. It is a means of minimizing uncertain consequences that may hinder in the growth of the company. In addition, it also helps in deciding about appropriate capital structure i.e. deciding about the appropriate mix of equity and debt financing for the organization (Hill, n.d).

All the financial information and resources of the company are required to be managed well and presented in the financial statements. It is mandatory for all non for profit and profit oriented organization to prepare financial statements representing the accurate management and allocation of financial resources along with expenditures and losses incurred fairly. Therefore, it must mention sources of funds and application of funds within the ...