3. Importance of Financial Management for NGOs

As a NGO you might be thinking your primary task is to work towards social service and not financial management. But unless your finances and funds are sorted, you cannot achieve your objectives. The primary significance of financial planning and management in NGOs lies in achieving its overall goals and objectives. Here are some points indicating the importance of financial management for an NGO.

  • Being accountable to the donors: Most NGOs rely completely on funding and therefore having proper accounting systems in place becomes all the more important. As a NGO you need to be accountable to the donor agencies and individuals who support your cause. With proper systems in place you can keep track of your expenditures and submit timely reports to them. This would lead to enhanced trust between you and the donor, thereby increasing the chances of your NGO getting a continuous support from them. With limited funding it is important for an NGO to manage all the funds in a careful manner. Furthermore, proper finance systems will also help the NGO maintain financial reports and showcase their entire spending to the regulatory bodies as per the agreed terms.
  • Securing future: The present financial condition of any organization determines its future. In a similar manner, NGOs should also opt for sustainable use of finance. This simply means that NGOs should spend in their present ventures, keeping in mind the future. After all, it is quite important to have future plans and become well secured as well as future-ready.
  • Eliminating fraud and theft: Malpractices and illegal deeds such as overuse of resources, fraud and theft have become prevalent among NGOs. Firm checks are mandatory, for minimizing such illicitness and preventing abuse of resources. With complete financial planning, coordination and control, these issues can be easily addressed.
  • Making productive decisions: With sound financial management, NGOs can make more productive decisions concerning resource allocation, fund raising, fund mobilizing and other undertakings. Good decision making skill enables right amount of funds to be invested at the right place. Funds are therefore efficiently and optimally utilized.
  • Achieving objectives: Every NGO is guided by certain policies and procedures, which are related to its overall objectives. Each decision that is undertaken by the authority is driven towards successful achievement of its set goals and objectives. Without organizing finance, it will be difficult for the organization and its employees to reach its aim and fulfill purpose of its existence.
  • Enhancing credibility: Managing finance is a matter of skills and tactics that ideally changes from time to time. With excellent finance management, NGOs enhance their image that enhances its value and making them more credible. By framing well defined financial plans and policies NGOs also earn good reputation within its community. They can also improve their current position and look forward to gain trust, faith and reliability.
  • Strengthening fundraising efforts: Most of the NGOs solely survive on its funds. Well organized financial resources help in strengthening fundraising efforts by giving an overall idea about available finance and the amount of finance that needs to be accumulated. Thus, employees get a fair idea regarding the expected amount and plan their fundraising ventures accordingly.