> *Finance* involves designing, maintaining, and sustaining systems of money and stuff.
In the for-profit world, "finance" focuses primarily on how a company resources what it owns and what it does – through equity (ownership), debt (borrowing), and retained earnings (accumulating profits over time). In the nonprofit world, finance *also* emphasizes the structure and relationship of an organization's assets (buildings, equipment, receivables, cash).
[[What's a Nonprofit Arts Organization?|Nonprofit organizations]] have a particularly complex and dynamic relationship with finance, because they intentionally create work that doesn't capture its full cost back from those it serves. Nonprofits are mission-seeking enterprises that favor social benefit or impact over financial return. This means that much of what they do is a net cost to the enterprise, rather than a net source of revenue or economic return.
A for-profit business, by definition, seeks to provides goods or services that will capture *more* than their full cost – generating a profit or an increase in value to the owners. So, when it's time to consider building or buying durable resources for the business – buildings, equipment, working capital – they have access to profit-seeking resources like investors or banks.
For a nonprofit organization, such as a nonprofit theater or museum or performance space, most durable resources they might acquire or control actually lead to a net loss over time, not a return. So, the range of sources available to fund the purchase or construction of durable resources are different than a for-profit firm. That's why nonprofits turn to donors to support their durable resources and their annual operations.
A primary framework for describing and analyzing an organizational financial structure and strength is the [[Statement of Financial Position (Balance Sheet)]]. For any nonprofit arts organization of significant size, constant and creative attention to the balance sheet is a core requirement in Arts Management.
- Ellis, Adrian. “Loss Leaders.” _Grantmakers in the Arts Reader_ 12, no. 3 (Fall 2001). [http://www.giarts.org/article/loss-leaders](http://www.giarts.org/article/loss-leaders).
- Miller, Clara. “Capital Structure Counts: The Business Roots of Capacity and Mission at Nonprofits.” Nonprofit Finance Fund, January 1, 2002. https://nff.org/report/capital-structure-counts-business-roots-capacity-and-mission-nonprofits
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