Not-for-profit refers to the fact that no individual will gain from the profits earned by an organisation, but any well run organisation should be achieving some level of profit so it can meet the needs of its members or beneficiaries and to stay solvent.
Good financial management of an NFP is as important as it is for any other organisation or company. They require sound budgeting, receipting and invoicing and cash flow practices and should be audited at least annually to maintain the accuracy of all financial records.
NFP is still a business so it is important to know the financial position at any time. How else will you know which activities are profitable and which are costing you money? The Board of Management is responsible for the financial health of the organisation and if it is mismanaged, its members are often liable. Do you really want to risk your personal assets?
Members of the NFP and other members of the community that have supported their cause need to be able to see how their money has been used and the financial records need to be open to question and accessible at all times to all members. Technically, anyone who is a member can walk in and ask to see the books when they feel like it. Your books must be maintained to professional standards.
Financial management of an NFP organisation is a responsibility that is taken on by usually one or a small group of people but no matter what your role, it is important that you have a basic understanding of accounting processes so that you know that everything is being done properly.
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