Social Value and Analyse How Social Value Could Be Used in the Financial Decision Making of a Non-For profit Program
Added on 2021-05-31
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Research the topic of Social Value and analyse how Social Value could be used in the financial decision making of a NFP program.INTRODUCTIONBefore discussing about how social values can be used in the financial decision making of a not for profit (NFP) program, it is vital to understand that what does social value in the context of NFP mean. It is a debatable issue that social values can act as a bridge between non-profit and profit business organizations. Social value, therefore is the quantification of the virtual significance that individuals put on the alterations and the modifications they practice in their lives. Social value has an enormous prospective to aid people change in the manner one understands the world around and thereby pronounce decisions as to where to endow the resources. There lies a notion that businessmen who are good souls know only too well but it is ultimately the NFP who are found to be in a position to discover a ‘Value proposition’ is the exclusive worth of a product or service grants to a customer (Hall 2015).ANALYSIS OF HOW SOCIAL VALUE COULD BE USED IN THE FINANCIAL DECISION MAKING OF A NFP PROGRAM There have been a noteworthy number of investigations and various evidences that prove that a greater quantum of not-for-profit (NFP) organizations is not managed well in terms of finances. Further, those NFP entities who are able to manage their finances at a decent level, fail to record their financial activities properly in the financial statements presented. Due to this mal-management of funds, the allocation of it in the various directions generally is not being able to reap benefits as expected from a NFP organization. The situation is such simplybecause a NFP is formed with a social cause in mind and accomplishment of the same is the soul criteria and vision, thereby they end up ignoring the financial part of it (Broom et.al. 2013). Social return on investment (SROI) is one of the most outstandingly worn and examined attitude for communal implications capacity with enhancing attention from practitioners. It is basically a type of mixed accounting which takes into consideration the financial view point as well as the monetized value of the social implication. The equation for SROI computation thereby is SROI = Tangible + Intangible Value of the Community
Hence, it can be said that it enables how social value can be used in taking the fund related decisions (Gurd et.al. 2014). It is very crucial for any organization whether profit oriented or not-for-profit oriented, to take care of its financial decisions. The former is however dedicated to do the same, but the latter is more concentrated towards serving the society than looking at the financial decisions.However, for their survival their financial decisions has to be take into account the social value it would enable to create rather than just doing social service without thinking about thefinal outcome of the same on the organizations’ health (Weerawardena et.al*. 2010). They should try to use the finances in such a manner that would enable them to fulfil their social values and issues in the best possible manner along with the fact that it would entail to raise confidence in its trustees and the public. This is critical, as if the trustees and the public are satisfied, then it become easy for them to procure more funds. Thus quality nonprofits develop advantages to the community by taking care of the issues being faced by the society and almost the entire social advantages developed have financial or economic value attached to it, which can be understood and recognized. The government and such other organizations which are formed not from a purpose to earn profits, basically examine nonprofits by concentrating on their actual costs than the financial gains they would produce (Rothschild, 2012). Thus social values can be fulfilled in the best manner by giving the best returns to the society and use that part of data for the purpose of financial decision making. The NFP entities receive funds via grants and donations mainly, due to which their funds are restricted, thus even though they do not carry any purpose to earn profits, yet to ensure that their social values are met well and they do not turn bankrupt at the same time, a suitable practice of taking good and sound financial decisions is a must. Thus financial decisions made with respect to the benefit of the entity will enable them to produce and fulfil their strategic goal and vision in a financially sound way. The events which these entities support and participate into should be critically managed and attentively implemented so that it promotes the entity as well as helps to meet the community and economic vision as well (Titman et.al. 2016). The level of audience available for the accomplishment of a social valuewill determine the kind of financial decision needed and the risk involved in the same. Every program financed by the NFP entity should be adequately checked and scrutinised with regards the cost and the efficiency and if the same is not viable and able to meet the social value at its full stream, then the decision to fund should be taken accordingly. Lastly, the social value should be calculated by using two of the most accurate methods used by the
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