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Social Value in Financial Decision Making

   

Added on  2023-06-12

6 Pages1375 Words262 Views
Running head: FINANCIAL DECISION MAKING 1
Financial Decision Making
Student Name
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FINANCIAL DECISION MAKING 2
Social Value in Financial Decision Making
Social value refers to the quantification of the financial and non-financial importance of
programs and interventions experienced by people in an organization or community (Platteau,
2015). Economically, social value is achieved by combining resources, processes, and policies in
order to improve the lives of individuals in the organization. Therefore, it from this perspective
that most nonprofit organizations exist with justification to improve the livelihood of
communities. Subsequently, social value intents to attain an inclusion and access of people to the
resources created within the organization. Significantly, elements of social value can be
incorporated into nonprofit organizations to quantify the economic value in a society.
Accordingly, quantification of the intrinsic value of nonprofit organizations can be considerably
difficult. However, measurement of the value creation can be accomplished by using social
return on investment metrics (SROI) and the social earnings calculations (Kennedy & Phillips,
2015). This paper discusses the use of social value in the financial decision making of a church
and other nonprofit organizations.
The major social values that contribute to the success of not-for-profit organizations are
honesty and loyalty. These virtues among others ensure high levels of integrity in ensuring
proper funds management. Unlike the profit-oriented commercial organizations, the social value
of the not-for-profit organizations is increasing the value of stakeholders. Stakeholders vary
depending on the organizations, for instance, stakeholders in a church are the Christians while
stakeholders in charity organizations may be donors. Therefore, the social value can be used to
make financial decisions that enhance the desirability need of the NFP organizations.
Accordingly, most non-profit organizations programs struggle with financial performance
measurements. As a result, these organizations need to establish a link between the performance

FINANCIAL DECISION MAKING 3
aspect and the strategies used in financial management in order to maximize their operations.
Substantially, financial tools such as budgets can be relied on when making financial decisions in
the organizations. In making the cash budgets, the organizations need to establish if they have
sufficient cash reserves to achieve the social value in a community. Cash budgets are vital
because they enable the organizations to make financial decisions regarding allocation of
resources to particular programs throughout the fiscal year (Titman, Martin, Keown & Martin,
2016). Therefore, the cash budgets are used by financial managers as decision tools to gauge the
operational performance of the organizations.
Stakeholders of not-for-profit organizations such as churches primarily based on the
financial data in evaluating the financial performance of the organizations (Titman, Martin,
Keown & Martin, 2016). Although the financial indicators are essential, they cannot be only
relied on to comprehensively make decisions on the financial performance of the churches or
non-profit organizations. Basing on the social value of the organizations, financial managers play
a key role in managing the resources provided by stakeholders such as Christians and donors of
the nonprofit organizations. Therefore, the financial managers have a responsibility of acting as
stewards for the resources within the church or non-profit organizations. Accordingly, the
financial managers are responsible for making financial decisions that determine the overall
performance of the church or not-for-profit programs. As a result, the managers evaluate whether
the financial resources are used to achieve the mission of the church and the NFP programs.
Several factors influence the financial decision making proves a church or not-for-profit
organization. Financial managers need to evaluate the performance of the organizations to
determine their contribution to attaining the social value goals of the organizations. The metrics
used in financial decision making in a non-profit organization include the value created to the

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