Financial Management in Nonprofit Organizations Essay - 1

Financial Management in Nonprofit Organizations - Essay Example The researcher found some key differences between the financial systems of both types of organizations. Those differences were mainly related to the sources of finance and its use by the organizations. The main difference that gives rise to all other differences is the motive of both organizations. The motive of the owners of for-profit organizations is to earn higher amounts of money to bring it in personal use. On the other hand, the motive of the management of not-for-profit organizations is to help people and society in resolving key issues. Such organizations get money to use it for the betterment of society. From the study, the researcher concluded that although there are some key differences between for-profit and not-for-profit organizations regarding sources and use of money, but a large number of for-profit organizations also show corporate social responsibility and spend some part of profit on social causes. The researcher also recommended the management committees of not- for-profit organizations to create and implement a proper check and balance system which should eliminate the chances of corruption by ensuring the use of money for social causes in a transparent manner. Introduction Financial management system of nonprofit organizations is generally different from that of for-profit organizations. ... In this paper, we will discuss some of the core issues regarding financial management systems of both types of organizations. The issues will include sources of funds, use of debt, and organizational objectives. We will discuss these issues in order to find some differences between working and financial systems of both types of organizations. Sources of Funds Source of funds is one of the main differences between the financial management systems of both types of organizations. Sources of funds refer to the way through which organizations get money to carryout business activities. There are different sources of funds for both types of organizations. For-Profit Organizations Private for-profit organizations get their funds in shape of profits that they get from their business activities. These organizations do businesses related to different industries and get huge figures of revenue every year. Some companies belong to construction, pharmaceutical, and garments industry, whereas some belong to other industries. Apart from receiving funds in form of profits, these companies also get funds from banks in the form of bank loans. These organizations have to pay back the loan to the banks in a given amount of time at agreed interest rates. If they do not do so, they become defaulters. However, in case of nonprofit organizations, there is no such issue because nonprofit organizations do not get loan from anywhere. For-profit organizations manage proper financial statements to know from where they have received funds and to whom they have to pay back the funds. Government organizations, on the other hand, receive funds from federal and provincial governments to run business activities. The profits are sent to the government to use for development