Financial management Essay Example | Topics and Well Written Essays - 1500 words

Financial management - Essay Example This is different from For-Profit organizations that source their funds from shareholders who are the real owners of these organizations. Organizational structure of NGO’s and For-Profit are a bit similar in the sense that both set of organizations are managed by boards of directors. Financial management entails the processes of budgeting, Taxation and corporate governance. NGO’s typically have financial budgets prepared over the period of the activities they are undertaking. On the other hand, For-Profit organizations have their financial budgets prepared for a period of one financial year. Governments levy taxes on all organizations for the purpose of implementing public project or service provision but with the exemption of NGO’s. According to Brigham (2010, 65), the main difference between NGO’s and For-Profit organizations is the objectives and goals of these organizations. NGO’s are set up to provide charitable goods or services to people with out need of making a profit. This major differentiating factor is the reason behind the differences in financial management practices between these organizations. Corporate governance is important in implementing integrity and management of organizational strategies. NGO’s are not particular in enforcing prudent corporate governance practices compared to For-Profit organizations. ... NGO’s are organizations which are not set out to make profits but instead they are meant to provide a service. This is opposed to profitable organizations which are meant to make profits. Organizational Structure The organizational structure of NGO’s is different from that of a profitable organization in that NGO’s are mandated to offer services compared to profit organizations which are meant to make profits. NGO’s are registered or mandated either by governments or special bodies to undertake projects or service delivery to different people. The major difference between NGO’s and profit organizations stems in the ownership structure of the two bodies. NGO’s are owned or operated by a board of directors or a steering committee in some cases; this board of directors is responsible for drawing up the financial strategies for the organization. The board of directors of an NGO are responsible for sourcing funds for the organization through diffe rent ways (Brigham 94). In some instances, some NGO’s have adopted the structure of a private company and used this structure to manage their financial operations. Most NGO’s source their funds from governments, churches and donations this is because these organizations act as governments and they only use their funds for capacity building. This is in contrast to profitable companies whereby ownership of these organizations belongs to some individuals. Profitable companies are owned by people known as shareholders; shareholders are responsible for funding the organization to undertake the goals and objectives of these organizations. Public owned organizations are profit organizations which comprise of a many owners in a company