A common headache and time drain for growing nonprofit entities is how they manage their accounting functions. Trying to find, and maintain, reliable, timely and trusted employees to handle bookkeeping and some higher-level accounting services can be difficult, if not impossible in a competitive workforce.
As agencies and the need for supporting systems grow, the workload and responsibility often falls to one person. This can lead to a financial control crisis. A considerable amount of time needs to be spent managing people, processes and procedures to promote a quality financial structure. Luckily, with today’s technological advances, significant benefits and efficiencies can be gained by outsourcing the accounting function in part or in whole. But, how do you know when it’s time to consider making an investment in accounting services?
Five indicators to consider when deciding whether your nonprofit should outsource accounting services:
1. Your nonprofit is outgrowing the accounting staff
Often the workload falls on one person to manage the entire accounting function. In a world where transparency is demanded, stakeholders want to see separation of duties and fraud mitigation. As the business grows, it is important to employ qualified staff that can keep up with the volume of financial transactions. Additionally, they should provide timely and relevant financial information.
Perhaps your nonprofit only needs to hire a part-time accountant to handle the higher-level tasks such as month-end close, tax reports, budgeting and strategic planning. Outsourcing those tasks could be just the answer to relieve some pressure on the bookkeeper and add another layer of oversight.
2. There are concerns about fraud in your nonprofit
No one wants to think the worst of their employees, but that denial doesn’t mean it doesn’t happen. That’s why it’s imperative to have accountability, structure and internal controls to mitigate the fraud risk.
Outsourcing the accounting function will add stability and the assurance that the business’ finances are accurately reported, best practices are implemented and followed, and proper controls are in place.
3. There are delays in your nonprofit’s accounting deliverables
When there’s one key accountant and she/he goes on vacation for a week, the financial records slide to a screeching halt. Perhaps because the person handling the accounting function is focusing on his or her “real job”, payroll or expense reports are not timely. This often causes late payments.
This type of accounting backlog can create an issue for business cash flow. Additionally, it can impede on the employees who depend on paychecks and expense reimbursement. When your nonprofit outsources its accounting, it brings a piece of mind knowing that, even in the absence of one employee, the books will continue to be maintained.
4. Your nonprofit’s finances have become more complex
If the nonprofit is successful and growing, likely, the finances are growing and becoming more complex. Further, nonprofit organizations managing grants and tracking expenses by funding source then becomes a major challenge.
Funders require specific reports during specific periods of performances to ensure their money is being well spent. To add to the problem, perhaps a bookkeeping mistake made last year haunts the current year, but the bookkeeper doesn’t know how to correct the entry. Hiring a nonprofit accounting expert can assist with more difficult financial issues. Even more, it will ensure revenues and expenses are recorded accurately.
5. Your nonprofit is modern, thinks outside the box, and environmentally conscious.
Beyond handling the obvious financial reports, bookkeeping and payroll management, outsourcing accounting services can also bring innovative gains to your nonprofit. A modern approach to accounting that reflects the methodology of your organization are within reach. Additional ideas include tele-commuting, virtual meetings, paper saving, file sharing and cloud-based technology solutions
If any of these indicators ring a bell, your nonprofit might be ready for outsourced accounting services. Contact NFP Partners today for a free 30-minute consultation. You can also visit our Ultimate Guide to Outsourced Nonprofit Accounting for more information.