Non-Profit vs. for Profit Organizations

This paper seeks to examine the financial management relationship between non-profit and for-profit organizations. A recent surge to push non-profit organizations to behave in a more business-like manner has resulted in an evaluation of the financial management practices. This paper examines a few of the similarities and differences amongst the two organizational types in relation to source of funding, performance evaluation measures, and governing mechanisms. The analysis of non-profit organizations leads to an understanding that many of the same methods used in examining for-profit organizations are suitable. However, it is important to take into consideration that the goal of a non-profit organization is the overall mission. Therefore, the evaluation should be based upon this fact.

The Small Business Encyclopedia defines a non-profit organization (NPO) as an institution with a purpose directed at assisting individuals and groups without regard for turning a profit (Nonprofit, n.d.). They are classified as any organization whose charter explicitly prohibits the distribution of profits to members. Moreover, non-profit organizations must demonstrate that they provide a public benefit (Moxham, 2009). Not all non-profits are charitable organizations. NPOs cover many areas of expertise including churches, hospitals, and the arts to name a few.
Recently, there has been a push for non-profit organizations to behave more business-like (Moxham, 2009). Because of the organizational structure, the financial management of NPOs must be examined in order to achieve this objective. There are many similarities in relation to financial management that exist between for-profit and non-profit organizations. However, there are some differences between the financial management of for-profit and NPOs that require a different approach. These similarities and differences are explained in their source of funds, performance evaluation measures, and corporate