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Financial Management for Nonprofit Organizations

Nonprofit organizations are either public or private organizations established with the aims of achieving certain goals rather than investing for profit maximization. Although nonprofit organizations could be similar to for-profit organizations especially in management and operations, their goals are different. The goals of nonprofit organizations are mainly influencing people’s lives through charitable activities such as poverty alleviation, anti-disease campaigns, community awareness about specific issues, and education programs among others. Such organizations get their funds from public and private grants, individual donations, or through sale of items, and some are usually exempted from taxes.

Financial management in NPOs is a task shared with the top management, normally focused on effective and efficient funds management. As NPOs seek to provide services of higher quality and lasting solutions, they require sound financial management and administration to make sure they operate at minimum costs. Managing an NPO can be a challenging task because there are usually laws that regulate the management and formation of such organizations hence, demanding conformity to corporate rules that are operational in the country. Sometimes NPOs are required to present their annual financial reports indicating their revenue and expenses. However, religious organizations are normally excluded from such requirements.

Different NPOs have varied management needs depending on the line of operation. For example, government agencies and social welfare organizations need to have comprehensive financial reports to facilitate future funding. In the same manner, civil and religious organizations conduct various projects for fundraising. Financial success depends two vital areas of financial management that is accurate and reliable budgeting, and management of the available cash. The reason for this is that the sources of funds for NPOs are subject to political and economic environments prevailing in the country. Therefore, financial management requires adequate planning and efficient implementation at any fiscal duration. A manager in a nonprofit organization must demonstrate accountability to the public as he or she uses financial data to make plans that will improve the efficiency of the organization. A budget is crucial because it shows the available funds and the expected expenditure. It is not only difficult to predict revenue contributions, but also the cash flow since the donors and sponsors do not expect to be beneficiaries of the services rendered. In addition, the manager should determine whether the organization has enough funds to sustain the provision of services.

In conclusion, the goal of nonprofit organizations is a continuous provision of social welfare. The financial management of an NPO should exhibit stewardship and accountability of donated funds, for the purpose implied by the sponsors or the objectives of the organization. For efficient financial management, budget planning and cash management are the most influential areas for the top management to consider.