Financial management for profit and non-profit organization  

Financial management for profit making and non-profit organization involves setting of goals and mission that are clearly defined and understood by everybody.  The objectives set in the non-profits organizations including the fulfillment of stakeholder’s needs have to be achieved just like profit making organizations should meet the profitability objectives for the sake of shareholders (McMillan, 2010). In both organizations, there is a clearly established legal separation between members and its self so as that members are shielded from financial liabilities. The preparation of financial statements and reports has to be done in line with generally accepted accounting principles for both organizations and these reports have to be reviewed and assessed by the board of directors (McMillan, 2010). The directors are also required to undertake their fiduciary duties as required in the law for both organizations.

The financial management for the organization also differs in various ways. To begin with , the non-for profit organizations does not have the financial flexibility enjoyed by commercial firms since it depends on well wishers to provide resources without engaging in any transactions (McMillan, 2010). The budgeting process and management of cash are two aspects that differentiate the financial management of the two organizations. The non-for-profit organizations have to pay close attention in preparation of the budget to determine whether it has sufficient funds to proceed with the provision of its services (McMillan, 2010). This is because the organization relies on donations but does not have many sources to finance its operations. The commercial organizations can access funds from various sources including borrowing and thus, its budgeting process is flexible.  This means that the process of funds allocation will also be different.

References

McMillan, E. J. (2010). Not-for-profit budgeting for nonprofit organizations. Hoboken, N.J: Wiley.