NFP Partners offers the benefits of experienced accounting professionals at a fraction of the in-house cost. Our outsourced accounting services range from total operation and management of the finance function to higher-level CFO support.
Managing your accounting department does not have to be a struggle that keeps your organization’s leadership awake at night and distracts from the main mission. Consider outsourcing some, or all, of your accounting functions to achieve strong financial management and enjoy peace of mind.
Find out how our outsourced accounting services can help your nonprofit organization and get your questions answered by exploring the topics below:
Are You a Good Candidate For Outsourced Accounting Services?
The fact that you are on this page probably pre-qualifies you as a candidate for outsourced accounting services. You may have overt evidence that your organization’s financial management is deficient, such as a critical audit report, the recent termination of your primary financial manager, or lost funding. On the contrary, you may be absent any immediate crisis and instead just have this intuitive sense that things are amiss and are not sure what to do about it.
Some of the general characteristics of nonprofit organizations are conducive to using outsourced accounting services as the primary strategy are:
- Some organizations, which are constrained by choice or circumstances, do not grow beyond a level where a full-time finance staff is required.
- The CEO and the Board want to control administrative overhead costs, but at the same time, understanding their fiscal responsibilities and risks, want to follow best practices and set a high standard for financial reporting.
- An organization is in the early growing stage with an operating budget of $500,000 to $4,000,000.
- The financial tracking and reporting requirements are at least moderately complex and require specialized nonprofit accounting expertise and software tools that otherwise may not be readily available or affordable.
- The organization requires an
audit orexpects to fairly soon.
- Management is focused on the mission, programs, and fundraising, leaving little time for attention to finance and accounting functions.
- Management is attuned to modern workplace practices that are facilitated by technology.
Why You Should Be Interested In Outsourced Nonprofit Accounting Services?
Nonprofit organizations in every growth phase – from startup to maturity – can benefit from expert outsourced accounting assistance. A CEO or executive director is generally focused on the organization’s mission, programs, and fundraising. Thus, managing in-house accounting, especially during the early and middle growth phases, often leads to weak financial management. This condition, unfortunately, characterizes too many nonprofit organizations. In spite of your efforts, here are a few of the reasons why your nonprofit’s financial management is dysfunctional:
- Your organization needs, at various times, multiple financial skills but can’t afford to hire a financial staff on a full-time basis.
- The organization may experience high turnover in finance and accounting positions resulting in an ongoing, on-the-job training program.
- You need stronger basic internal controls, such as having someone who handles your money separate from someone who accounts for it.
- There are problems in accounting and reporting on grants and restricted funds.
- Your organization is growing and you need to hire people who can raise money or deliver services, not finance.
- The nonprofit and its keyboard members may lack basic financial knowledge and are not getting support from your primary financial staff person.
- You simply don’t have reliable financial information, allowing you and your Board to make good decisions.
What Benefits Might You Experience Through Outsourced Accounting Services?
Outsourcing your accounting can result in significant cost savings. While results vary from organization to organization, the cost of outsourcing generally does not exceed the true cost of maintaining the function in-house. Likewise, outsourcing will result in a major lift in the quality of financial information and internal control. Some benefits you may expect are:
- Allow the CEO to focus on the mission and program delivery with minimal distractions.
- Provide relevant, accurate and timely financial information to the various stakeholders (internal managers, Board, donors, funders), resulting in better decisions.
- Operate within a system of internal control that reduces the risk of fraud and misallocation of assets, while satisfying audit requirements.
- Reduce the number of internal accounting staff through process standardization and training, allowing for greater productivity.
Additional benefits to expect are listed below:
- Defer the need for a full-time financial professional.
- Minimize internal staff distraction and external fees for audit preparation and support.
- Facilitate transition to a professional in-house staff when growth requires that step.
- Assure continuity of the finance function upon personnel turnover.
- Board and CEO receive knowledgeable advice and mentoring from a trusted financial professional.
- Eliminate the need for separate in-house installed accounting software and IT maintenance costs.
- Enjoy certainty and peace of mind that financial management is working.
Take this self-quiz. If you can answer yes to some of these you may be a perfect fit for our services.
Are You Ready To Explore Outsourced Accounting Services?
Do You Want to Take a Deeper Dive Into the Accounting Services Offered?
articles on outsourced nonprofit accounting servies
Nonprofits in every stage, from growth to maturity, can benefit greatly from outsourced accounting services. In this article, NFP Partners details the most fundamental financial management components at each stage with an emphasis on the growth cycle. Additionally, if you’d like more information on the benefits of outsourced accounting services, read Outsourced Nonprofit Accounting Benefits – Beyond The Money.
The most critical stage for a nonprofit, or a business, is the growth stage. Successful growth moves the organization to the maturity stage, sometimes referred to in the nonprofit world as “sustainability.” Nonprofits in the mature stage, and who have good financial management, are characterized by strong leadership, efficient practices, and financial reports to stakeholders that are accurate, relevant, and timely.
The primary focus of a startup nonprofit organization is on its mission and fundraising. Financial management is necessary, but rudimentary, and scaled to what is needed while ensuring legal compliance.
The transition from startup to the growth cycle starts when an organization’s mission and programs gain market acceptance and demand for program services exceeds its ability to supply.
Reaching the maturity stage is a major milestone for a nonprofit organization. The challenge now is to stay at the top by continuing to innovate and refresh.
Nonprofits in the startup stage
For nonprofits in the start-up stage, a minimalist financial management approach would include the following:
- A person with some accounting and finance credentials oversees the finances (a Board member or qualified volunteer).
- A paid, part-time bookkeeper or volunteer with accounting skills is retained.
- Simple financial reports are prepared monthly for the executive director and Board consisting of an income statement and balance sheet.
- Revenues are identified by source and whether or not they are restricted.
- Separation of duties in the handling of cash.
- Monthly bank reconciliations are done by a person other than the executive director or accountant.
- A decision-maker adopts basic expenditure approval guidelines.
- Accounting automation is done in-house using basic software (e.g., QuickBooks Online)
- Federal, state and local tax compliance gets special attention.
- Annual compilation or review by a CPA.
Outsourced accounting for nonprofits in the startup stage
It’s critical that startup nonprofits manage their finances as they gain traction and migrate to the growth stage. The major challenges are legal and regulatory compliance, internal control, and financial reporting. Expecting a volunteer or paid in-house bookkeeper with inadequate supervision to accomplish all of the necessary tasks effectively is unrealistic and exposes the organization to unnecessary risk. Because of such, outsourcing becomes a viable alternative.
- One model is a complete turnkey service with two different accountants deployed. One accountant does day-to-day tasks. The other accountant, a more senior controller-level professional, provides oversight. This includes internal control measures, month-end financial review, reporting, interpretation, and counseling to the Executive Director and the Board.
- On the other hand, a variation of the above can also exist. In this scenario, the nonprofit retains the day-to-day accountant, while an outsourced accounting provider provides oversight.
Nonprofits in the growth stage
Meeting the challenges of growth requires moving to a different management model to build capacity and lay the groundwork to reach maturity. Typical challenges include staff hiring and development, creating an organizational structure, and delegating responsibility along organizational lines. Similarly, an organization in the growth stage may also have a hard time formalizing and documenting processes, expanding and developing its Board and taking a more strategic view.
Characteristics of a progressive nonprofit
Financial management now becomes more than a necessity, but a critical driver of the organization’s progress toward maturity. Even more, it’s on a fast-track to becoming more robust and professional but still very formative. Some of the characteristics that one can expect in a progressive nonprofit are the following:
- An experienced accountant manages the accounting and finance function but may not be trained as, or have the experience of, a CFO or controller (but may carry an exaggerated title)
- As an alternative all, or part, of the accounting function is outsourced to a professional accounting services company.
- The Board expands and creates a finance and/or audit committee.
- The accounting becomes complex, tracking revenue and expenditures by funding source, programs, and function.
- Annual budgets are prepared for revenues and expenditures and incorporated into the financial statements.
- Internal controls are implemented and documented standardize processes, and prevent fraud and embezzlement.
- Expenditure approval is formalized.
- Financial statements are more customized for the stakeholders, including the top- and middle-management, the Board, and funders.
- Accounting automation migrates to a more sophisticated nonprofit specialized software application hosted in the cloud (e.g., Abila MIP Fund Accounting™).
- Key Performance Indicators (KPI’s) are defined and incorporated into financial performance reporting. For more information on KPI’s, visit our article, “Does your organization track performance?.”
- The organization receives an audit of its financial statements that attest to its compliance with generally accepted accounting principles (GAAP).
Outsourced accounting for nonprofits in the growth-stage
With growth comes complexity and new challenges in performing and managing finances. The organization requires high performance of day-to-day accounting tasks, having internal controls in place, strong financial reporting and analysis, and strategic planning. Additionally, an organization needs a “nuts and bolts” accountant, a controller, and sometimes a CFO. Finding all of these attributes in one or two people is a tall order. Therefore, outsourcing all or some of the work can provide the skills required and assure continuity as a nonprofit matures. This is the sweet spot for outsourcing with alternative deployment scenarios:
- A total turnkey arrangement with all functions outsourced may be more appropriate earlier in the growth stage where executive management remains highly focused on meeting demand.
- At some point, having a one- or two-person, in-house accounting staff to perform day-to-day and month-end tasks becomes a perceived need. Because of such, an outsourced accounting provider performs specialized functions (e.g., payroll or accounts payable), review, analysis, budgeting assistance, audit preparation, and strategic planning counseling.
Nonprofits in the maturity stage
The organization becomes more important than any single individual. Normally, a mature nonprofit will maintain an in-house finance team at all levels, accountant to CFO, comprising the required skills. Outsourcing remains applicable for short-term projects that require an expert to temporarily fill staff vacancies.
For more information on how NFP Partners can help your nonprofit through our outsourced nonprofit accounting services, click here.
Employee turnover is no stranger in the nonprofit world.
Although it’s difficult to get reliable and current statistics by position types, an annual rate of 25% is a fair overall benchmark. This article shows how your nonprofit can calculate this rate and why it is significant.
How to calculate your nonprofit’s overall benchmark
Simply stated, count the number of employees separated over an annual period and divide that by the average number of employees of the same period.
(Beginning + Ending Number of Employees) / 2
This formula can be modified to focus on a department like accounting. Also, take into account seasonal variations and special events or circumstances. But, for discussion purposes, let’s use 25%. (more…)