Financial Management 2IntroductionFinancial management in a nonprofit organization is significant to effectively run the business operation. It is identified that the main goal of profit organization is to earn a profit and increase the value of their shareholders. But, the main purpose of the non-profit organization is to facilitate the socially desirable requirement on an enduring basis. In current business practices, profit organization depends on exchange transaction between businesses and B2C. However, the non-profit organization depends on the money that is donated with a specific intention (Hudson, 2017).This essay discusses the financial management difference between nonprofit and profit organization. It also presents the role of Financial Management in not- for profit organizations.Role of Financial Management in Not- For Profit Organizations According to the Finkler et al. (2016), financial management is essential for both profit and non-profit organization. A non-profit organization must demonstrate the activities regarding donating resources. The workforces of the organization could be able to demonstrate their expenses activities by assessing the financial records. Furthermore, two essential areas of financial management play important role for not-for-profit organization named budgeting and cash management. Therefore, these companies focus on the utilization of reserved cash. It can be stated that estimation of cash flow is challenging for the organization because the organization heavily depends on the resource providers. In support to this, Renz (2016) evaluated that management and protection of financial resources are essential for the not-for-profit organization because, without adequate resources, the company may not attain its mission and survive in the industry. Financial resources comprise goods and services, and money. Money includes the checking, securities, investment, cash and savings that organization has required to run its business operation. Goods contain the supplies,
Financial Management 3merchandise, and equipment. Services are the program and activities which are delivered to the customers. These resources could be managed by financial management because it will decline the risks related to business. Furthermore, it will enhance the value and gain the financial resources. Bryce (2017) discussed that financial management plays important to manage the asset in the nonprofit organization. Therefore, it is essential for an organization that it should have adequate assets to fund their existing operations. They have to be competent to make stability between available and growing resources. Moreover, not for profit organization should be able to pay debts in a well-timed manner, and should accomplish other financial obligation. After creating the budget, a company can pay attention on financing the existing operation and gain resources to increase their return on capital and assets. Assets management is also required to maximize theresources. It also manages the cash inflows and outflows which help the not for profit organization to provide more benefits to communities. Consequently, it will gain significance of budgeting because the nonprofit organization would be able to attain the financial obligation. McKinney (2015) argued that nonprofit organization is distinguished from profit organization in a different manner. In this way, it stated that the main aim of profit organization is to increase theprofits and transfer this profit to the director of the company and shareholders while the key purpose of the nonprofit organization is to fulfill the needs of societies. Together with, the nonprofit organization has no director and employees act with the purpose of increasing the revenue and minimizing the costs because it will ensure that company is providing benefits to societies. In favor to this, Maier et al. (2016) stated that profit organization pays tax on their earnings however nonprofit organization does not pay taxes due to not getting profit. Government helps
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