Application of Financial Management to a Non-Profit Organization
Autor: Maryam • December 6, 2017 • 723 Words (3 Pages) • 886 Views
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is an important resource for an NPO’s. To maintain fiscal viability, the organization must have enough money to pay its debt. Growth basis financial statements can show an excess of income over expenses, but this does not mean that is cash in the bank (Michalski G. , 2012). Recurrent and seasonal fluctuations also have an impact on an organization’s cash. Cash inflows and outflows for most NPO’s typically fluctuate throughout the year. This skyrockets the importance of the budgeting process because objectives must be met on a timely and consistent basis (Michalski G. , 2012). The organization must plan ahead for those times when cash inflow tends to be less than cash outflows.
The Fund Accounting
It is a method of recording those resources that their use may be limited by granting agencies donors, governing boards, or other entities or by law. Using a fund accounting system allows an organization to segregate financial resources between those immediately available for ongoing operations and those intended for a donor-specified use (Michalski G. , 2012).
The method assists the body in separating donated money by time and purpose restriction as stated by external resource providers, donors, granting organizations and governmental entities. It is a challenge to a for-profit enterprise commercial system to follow-up the flows of money between funds while meeting time and purpose restrictions (James, 2013). Either way, the management of an NPO’s using a fund accounting system must consider two things: the reporting day to day needs of financial management and the ability to demonstrate stewardship of donated resources.
Conclusions
NPO main aim is not to make profit because it’s not a government funded organization thus carry on their objectives with an aim to eradicate poverty, enhance Christianity (Michalski G. &., 2011). The donations from other countries or other big organizations are used to produce social services which are given by the government in full.
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