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Managing Finances for a Nonprofit Organization

Financial management for nonprofit organizations requires different skills than financial management in the for-profit sector. As such, those who understand how to manage finances for a nonprofit organization are commodities in the philanthropic world. After all, nonprofits in the U.S. contributed $878 billion to the economy in 2012, according to the National Council of Nonprofits. Each of those dollars had to be accounted for, not just to a board of directors but also to donors; the people and community the nonprofit serves; and local, state and federal governments.

Earning a Master of Science in Nonprofit Administration can give you the knowledge you need to succeed in the nonprofit world, while demonstrating to potential employers that you are truly committed to a greater social cause.

Differences Between Nonprofits and For-Profits

Nonprofits are different than for-profits in many different ways, starting with the fact that there is no owner or stockholder of a nonprofit agency. Instead of earning profits for stockholders, a nonprofit’s primary mission is to provide a service to those in need. Other major issues that people in charge of financial management for nonprofit organizations need to understand include the following:

  • Tax requirements. Nonprofits are exempt from many taxes that for-profit companies are required to pay. Understanding what is and is not exempt and keeping up with how the laws change is a vital part of a nonprofit finance manager’s job.
  • Raising funds. Nonprofits rely on donors, memberships, grants, events and investments for their revenues. For-profits, by contrast, rely largely on the sales of goods or services. A nonprofit finance manager, then, needs to understand the complicated world of fundraising — and how to ensure that revenues exceed expenditures.
  • The importance of trust. Donors, the board of directors and the community all need to trust that the nonprofit is using its funds the way they were earmarked. That means a nonprofit finance manager needs to be able to provide detailed information regarding where and how money is spent. He or she may also need to be ready to justify those expenditures.

Financial Challenges Nonprofits Can Face

A 2012 report from the Wallace Foundation opened by noting that “nonprofit organizations are rarely judged solely by their financial bottom line; instead, their worth is gauged by the effectiveness of their services and how successfully they achieve their mission.”

However, the report goes on to say that many nonprofits are vulnerable because of low cash reserves, difficulty in balancing daily finances and lack of long-term strategic planning. That is why a financial manager who understands both the importance of the short-term impact of a nonprofit as well as the importance of long-term planning is crucial to a nonprofit’s success.

Earning a Master’s Degree in Nonprofit Administration

If you are interested in a career managing finances for a nonprofit organization, you should consider additional education. A master’s degree in nonprofit administration, for instance, can give you the experience and education you need to handle financial management for nonprofit organizations. Some of the classes you might take while studying nonprofit administration include the following:

  • Development of Philanthropy and Nonprofit Organizations.
  • Nonprofit Financial Management.
  • Nonprofit Governance and Decision-Making.

Some master’s degree programs even offer classes on capital campaign design, annual giving campaigns and planned giving — all knowledge that is valuable to a nonprofit looking for a finance manager.

If you are interested in being a financial leader at a nonprofit that you truly believe in, then take the time to educate yourself about the nonprofit world. By learning and understanding the complex world of financial management in nonprofit organizations, you will go a long way toward guaranteeing not only your success but also the success of the nonprofit you work for.

Learn more about the LSUS online MS in Nonprofit Administration program.

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National Council of Nonprofits: Tools & Resources

The Wallace Foundation: Building Stronger Nonprofits Through Better Financial Management

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