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?
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Has Your Nonprofit Outgrown its Accounting Software?
We often get asked, by growing nonprofit organizations, whether they have outgrown their accounting software – most notably QuickBooks. Let’s preface this by saying when we get asked, the honest answer is—it depends.
It depends on the size of your nonprofit and how quickly it is growing as well and other factors, such as the complexity of your funding sources. We know migrating to new accounting software can be overwhelming, which is why we’ve written Stepping Up to New Accounting Software – How It Really Works. Note: NFP Partners are experts in QuickBooks and we serve plenty of clients on this platform. But, it does have its limitations.
How to know if your nonprofit has outgrown QuickBooks:
1. You are constantly having to use other programs (most often Excel) to build reports and subsidiary records.
This is probably the number one indicator that a nonprofit realize has outgrown QuickBooks or other entry-level accounting software. Intuit works at providing better reporting options in its online and desktop products but still falls short in meeting more complex financial reporting requirements. If you are on the edge about this one, consider reading Accounting Software Questions for Your Nonprofit to Ask.
2. Your nonprofit has multiple funding sources.
QuickBooks has serious structural limitations in its capability to handle a growing organization with multiple funding sources that may include Federal, state and local government, private donations and foundation grants. Minimally, nonprofits must classify accounting entries by natural account (asset, liability, revenue, expense) and expenditures by function (program, fundraising, and administration). As the QuickBooks account structure is limited to “account” and “class”, there is no clean way to add tracking by funding source. This limitation becomes a major factor in your organization’s ability to timely bill and report to funders, and maintaining transparency to compete for grants.
3. You’re worried your internal controls may not be up to par.
Quickbooks’ internal controls are weak, especially when there are multiple users and is not constructed to enforce a separation of duties. The more costly Enterprise edition has improved upon this but still does not address the account structural limitation referred to in #2 above.
4. Everything takes longer than it should
You may have outgrown your accounting software if the following takes longer than it should:
- Entering transactions
- Creating bills
- Pulling reports
- Month-end closing
- Audit preparation
If you are finding everything you do, related to your books, takes a significant chunk out of your day, it’s probably time to move to a more robust system.
5. You are unable to cross fiscal years for reporting needs.
All organizations do not have the same fiscal year as their funders. Grant reporting becomes especially burdensome when unable to report the correct expenses and revenue for the grantor’s mandated period of performance. Combining two fiscal years to make one consolidated grant report becomes overly manual and time-consuming, not to mention, frustrating.
In addition, it increases the risk of not capturing all of the expenses related to the grant. Thus, your grant billing will be understated and your agency might not be reimbursed for all of the allowable expenses related to the program.
Many nonprofits have outgrown their entry-level accounting software and have turned to a specialized accounting software system to support the next growth phase. Rip off the Band-Aids and implement a solution that will help you achieve your financial goals.
If you are asking these questions already, it’s likely your organization has outgrown your current software. We invite you to contact us to learn more about our solutions for small- and mid-sized businesses and receive a free accounting software assessment. It’s easier and more affordable than you might think. You can also visit our Ultimate Guide to Outsourced Nonprofit Accounting to learn more.
Breaking Down the Costs of Outsourced Nonprofit Accounting
There are many reasons nonprofit organizations are moving to outsourced accounting services (OAS). The one most cited by top managers of fast-growth organizations is being able to focus on the mission, programs, and fundraising while having the assurance that finances are being competently managed.
Further points to consider when noting why nonprofits are moving toward outsourced accounting services include employee turnover, audit issues, and inadequate accounting technology.
But, what about the cost of purchasing outsourced nonprofit accounting services in relation to maintaining an in-house staff? Are the benefits worth the cost? There’s a perception that outsourcing accounting services are more expensive than maintaining an in-house staff. Is this true?
Though NFP Partners is a provider of outsourced nonprofit accounting services, our goal here is to help you and your nonprofit organization decide the best-fitting accounting option. Let’s examine the costs of outsourced nonprofit accounting services by looking more closely at the cost components. Namely, we’ll discuss personnel costs, service pricing, and additional cost savings.
Based on PayScale’s nonprofit accounting annual salaries for accounting and finance personnel, the median by position are:
Financial Controller $90,000
Accounting Manager $75,000
Senior Accountant $69,000
Staff Accountant $53,000
For illustrative purposes, let’s assume a composite of these skill levels is required in two full-time equivalent positions for a small- to mid-size nonprofit. The average salary is $71,750 and with two people, that total is $143,500. You must also add 25% for employer-paid taxes and benefits making the annual cash outlay $179,375. Let’s set this as the ceiling for which a nonprofit will not exceed when purchasing outsourced accounting services.
Outsourced Accounting Service Pricing
So, how does an outsourced accounting services provider price its equivalent services and return a profit? Likely, its personnel costs are at least 15% higher for full-time equivalents. Therefore, in order to make a profit, its personnel must work smarter and faster, eliminating much of the time spent by internal personnel that doesn’t deliver a direct benefit.
Modestly, this could range from 40- to 50-percent, including vacation and sick leave, training, attending meetings, and non-productive (water cooler) time. Assuming an accounting services provider can do the work in significantly less time than in-house staff, the price charged on an annual basis would range as follows. For more context, we’ve also included the cost-saving figures from 2018, which is when this article was originally written:
|OSA Efficiency (% time required)||Annual Price of OSA Service||Cost Saving|
$56,000 in 2018
$64,375 in 2020
$29,000 in 2018
$37,375 in 2020
$15,000 in 2018
$23,375 in 2020
Additional Cost Savings
The above presentation is incomplete without mentioning other potential cost savings from outsourcing some or all of the nonprofit’s accounting functions. Here are a few:
- Reduced office overhead expenses
- Staff recruitment and personnel training costs
- Audit fees
- Additional costs attributable to personnel turnover and discontinuity
- Losses due to employee theft or fraud
- Maintaining accounting technology – software and IT support
Our conclusion is this – outsourced nonprofit accounting services can deliver significant benefits with stronger financial management at a cost less than maintaining an internal staff for most organizations from startup to maturity. For more information, read How Your Nonprofit Can Benefit from Outsourced Accounting Services.
For more information on how NFP Partners can help your nonprofit through our outsourced nonprofit accounting services, click here. To learn more about outsourced nonprofit accounting, visit our Ultimate Guide to Outsourced Nonprofit Accounting.