What Is Organizational Fiscal Policy?
Fiscal policy has somewhat different definitions depending on the organization. In government, fiscal policy usually relates to how agencies use revenue generation (taxes) and expenditures to influence local, state or national economies. For-profit and nonprofit companies adopt organizational fiscal policies to define their accounting, financial and operational policies and strategies to support their missions and goals. For example, a nonprofit organization tailors its fiscal policy to generate sufficient revenues and gifts to meet its operating expenses.
Other People Are Reading
-
Government Fiscal Policy
-
Governments use their fiscal policies in different ways depending on their revenue sources and mission. The overriding fiscal goal usually is to balance revenue and expenses to avoid a deficit, which requires borrowing funds by means such as issuing bonds. Generating a surplus can be just as troubling as a deficit, because taxpayers will express their displeasure with higher than necessary tax levels. Federal governments also set their organizational fiscal policy to positively influence their economies, hoping to keep them strong and stable.
For-Profit and Nonprofit Organizations
-
Organizational fiscal policy displays a company's plan of conducting its financial activities and how these procedures will benefit the business and achieve its goals. While nonprofit companies typically design fiscal policies to achieve revenue goals that at least equal operating expenses, for-profit companies match fiscal policy to marketing strategy goals, including capturing a certain market share percentage, and other strategic goals, such as increasing clients, meeting profit margin percentages or reducing operating expenses by a certain percentage.
-
Balancing Act
-
Organizational fiscal policy is always a delicate balancing act. While designing and implementing an effective policy is challenging in business, governments face even more obstacles. Governments can use available data to estimate revenue, but they have no assurances they'll receive all projected dollars. Although governments can predict many operating expenditures, including compensation, there are some variable costs -- snowstorm plowing expenses, for example -- that remain mysteries until incurred. Companies have equal concerns, but they have the advantage of being able to adjust marketing or financial strategies to increase revenue or decrease expenses when needed.
Management and Board Must Agree
-
Organizational fiscal policy is directly related to mission statements. Mission statements are written and adopted by executive management and the board of directors. Therefore, company fiscal policy should be created and adopted by management and board members jointly. Creating fiscal policy needs neither accountants nor bookkeepers. It does require the input of strategic thinkers and people with authority who understand company objectives. The financial staff can "massage" the organizational fiscal policy into detailed procedures that complement the policy.
-
