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The Financial Management of Non-Profit Organizations

Groups of people that help hospitals, orphanages, environmental agencies, and labor unions are called non-profit organizations.

Author: Lauren Edith
Date: Jan 13, 2012 - 10:23:11 AM

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Groups of people that help hospitals, orphanages, environmental agencies, and labor unions are called non-profit organizations.

These organizations obtain their finances from donations and fund-raising activities as a substitute for profits from business deals. As opposed to working with the funds to create additional revenues, they use it for their target beneficiary. Even though they differ from profit-oriented organizations, non-profit organizations still require proper economical management to budget their resources.


When it comes to financial management, a key factor to consider is the accounting technique. Profit-oriented organizations use systems or strategic plans to create and calculate income. Non-profit organizations also need a system to manage their funds. But, volunteer workers in non-profit organizations normally lack the correct skill for the job. With this problem in mind, officers of non-profit organizations should tell their members about the essentials of the accounting procedure.


One of the elementary accounting systems that non-profit organizations can utilize is bookkeeping. This involves recording the financial transactions produced by the group - in this case, donations and outsourcing. The bookkeeping method is also divided into two: accrual-basis systems and cash-basis systems. The former is often utilized by commercial companies, but the later is taught and employed by non-profit organizations. In the cash-basis process, both the transactions and costs are merely recorded during the actual cash exchange.


The individual in charge of all finances of a non-profit organization is the board treasurer. With other board members, the treasurer helps make a monetary spending budget for the activities of the organization. He/she also assists in devising a set of policies and procedures for all monetary transactions. The board treasurer is also responsible for helping other members recognize the monetary plans and management from the organization. At times, the board treasurer utilizes the Sage fundraising software to make finance accounting less of a hassle and much more accurate.


Like commercial organizations, non-profit organizations will need create annual monetary statement reports. These will assist the organization determine their financial standing. Non-profit organizations frequently use simple bookkeeping details to create financial statements like cash flow reports, statement of activities, along with the present financial status of the organization. They can also employ of the Sage non profit software to come up with significantly more accurate calculations of these reports.


Non-profit organizations have to make certain that their finances are on track, and in the right hands. These organizations can avoid financial problems and security breaches by using Sage MIP support computer software for their accounting procedures. Via accounting software, board members can authorize and restrict access to economic details besides other relevant information to enhance organization's security.

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