1. Financial Management  Financial management is needed for governance and accountability reasons: management has to report to the board on the organization’s financial status, and the board reports to the fiscal authorities by filing tax returns, to funders by submitting project reports, or to the general public by publishing an annual report.  In the US, many nonprofit organizations required to submit Form 990 to the Internal Revenue Service have to file this annual tax declaration after the end of each fiscal year.  In the UK, charities submit annual statements to the Charity Commission, and German nonprofits to the local tax office.

2.  How is that in Turkey?  Alongside being used for internal and external accountability, financial management is needed as a management tool in planning and decision-making as well as for monitoring performance and everyday operations.  Strategic planning, performance, and finance are closely related: in particular for larger nonprofits, where they are part of larger information management system that includes, in addition to financial aspects, information on mission accomplishments, efficiency and effectiveness, personnel, and member-client, and user-related data.

3. Basic Financial Relationships  Financial reporting standards and fiscal requirements for nonprofit organizations vary by country as well as by state and local laws.  They are also different depending on the size and purpose of the organization, the field in which it operates, and its revenue sources.  For example, in the US, nonprofits with less than $25000 of annual turnover are not required to submit Form 900 to the IRS, foundations have greater fiscal reporting requirements than 501©(3) organizations, and the latter greater requirements than religious congregations.

4.  Organizations operating in the health care or education field have stricter and more complex reporting requirements than nonprofits in the field of culture.  Organizations receiving government grants tend to have more complex and time-consuming financial reporting requirements than do organizations relying primarily on individual contributions or grants.  There are two basic kinds of bookkeeping: small organizations in particular simply record when a cash transaction takes place, either as expenditure or as revenue.  Normally, there are accounts payable and accounts receivable, which together offer a more realistic view of the organization’s overall financial situation.

5.  We need to keep in mind that there are assets, loans, investments, depreciation, and many other kinds of flows that affect its financial situation and are, therefore, of interest to the board and management.  There are 4 major components to financial management: the balance sheet, the income and expense (profit and loss) statement, the cash flow statement, and budget.

6. The Balance Sheet  The balance sheet provides an overview of the financial state of the nonprofit organization on a given date, typically the end of the fiscal year.  It includes 3 major components: assets (what the organization owns and is owed), liabilities (what it owes and is obligated to pay), and the balance in terms of surplus or deficit of assets over liabilities.  While current assets refer to the fiscal year in question and include cash, accounts receivable for services rendered, prepaid items, or supplies in stock, long-term assets span more than one fiscal year, and refer to investment, property, equipment, and the like.

7. The Income and Expense Statement  The income and expense statement shows the performance over a given period, usually the last fiscal year.  Expenditures include wages and salaries, including social security charges and other employment-related benefits, and program-related and common costs such as utility charges or rent.  Revenue covers items such as admission fees, membership fees, other fees and charges for services, grants, sales, gifts, and royalties.

8. The Cash Flow Statement  The cash flow statement offers a summary of the cash movements in the organization and indicates its liquidity or readiness to operate as a financial entity.  There are two major types of cash flows: inflows and outflows.  Inflows include; business activities, gifts and grants, cash supplied by lenders such as banks, divestment and asset disposal.  Outflows include; investments in assets and acquisitions, interest payments and reserve funds.

9. Budgets  Budgets are different from balance sheets and cash flow statements.  They are comprehensive financial work plans covering a specific project or program over a specified period. Budgets are instruments for showing; 1.Planning considerations - setting goals, priorities, and strategies and coordination of them. 2.Political influences - a budget can show competing scenarios and hence be used to influence policy.

10. 3. Social and economic considerations-granting and denying privileges, changing cost items and funding levels, affecting the growth and capacity of an organization and the community it serves. 4. Legal considerations-monetary expression of entitlements and fiscal responsibilities such as government payments; they are also tools for accountability and transparency.  A very common type of budget for nonprofit organizations is the Line-item budget.  The primary objective of Line-item budgets is to account for expenditures.  Line-item budgets are used for financial and fiscal reporting, for accountability purposes, and for a managerial perspective, for calculating input units.

11.  By contrast, Performance budgets are used less for reporting purposes.  Their primary use is for estimating the minimum inputs needed to achieve a desired standard of output.  Thus, in addition to input items, a performance budget requires specified output units; the emphasis in performance budget is on efficiency.  Zero-based budgets require that all line-items be reviewed and approved every year, with no assumptions made as to the increments of previous base budgets.  Program budgeting takes a different stating point, and begins by listing the organization’s core programs based on their mission relevance.

12.  Each program is then budgeted separately, either using line-item or performance budgets, even if they share common inputs and cost centers.  At the end though, these costs for each program are linked and commonalities are estimated and used to build a cross- program budget.  Analyzing the performance of cost, revenue, and responsibility centers can improve accountability, governance, and organizational management alike.

13. Business Plan  A business plan is a macro plan on how to implement a mission and the set of objectives.  It is based on a set of assumptions about how the organization will operate and create value around its stated mission, and it sets out the needs, rationale, governance, and financing of the organization.  Business plans are generally prepared as part of the start-up of an organization; however many organizations update their business plans on a regular basis to incorporate results of strategic planning process.

14. Key elements covered in business plans are: 1.Vision, mission, and values guiding the organization. 2.Organizational description (size, activities, units, etc.) 3.Needs assessment, “market” analysis. 4.Services provided, at what quality and quantity. 5.Operations (how services will be delivered and why) 6.Marketing and outreach plan. 7.Governance, list of board members

15. 8. Management approach and personnel policies 9. Financial analysis; funds available and needed, projected costs and income 10. Assessment and program evaluation; performance indicator.

16. Marketing  It involves a range of activities such as the marketing of services provided, cause-related marketing, image marketing, and branding.  As part of a business plan, marketing analysis has become a seemingly indispensable tool for looking at how the organization intends to approach its customers, members, users, or the public at large.  Marketing researchers use the so-called “four Ps” which organizations employ to support and reinforce their competitive positon.

17. 1.Product (quality, features, options, style, branding, warranties, etc.) 2.Price (list price, discounts, allowances, payment and credit terms, etc.) 3.Place (channels, coverage, locations, inventory, etc.) 4.Promotion (advertising, publicity, public relations).