Since establishing our outsourced accounting practice almost four years ago, we have experienced steady growth. Most of our original clients are still with us.
We have recently noticed that nonprofits are increasingly interested in outsourcing their accounting and CFO functions, including larger organizations that have traditionally maintained a full in-house staff. We have also become aware of other accounting services’ providers that focus exclusively on the not-for-profit sector.
So, what explains this perceived trend? From our observation and experience, there are two main drivers:
- Non-profit CEOs and Board members are more aware of and take their responsibility to maintain transparency and accountability seriously. However, they are frustrated with their internal accounting staff’s ongoing mediocre performance.
- Outsourcing reduces costs, since the same work gets accomplished more efficiently with superior results. Over time, outsourcing can save some organizations at least 20 percent by utilizing proven processes, competent personnel, and superior technology.
Although not a primary driver, technology advances in communications, cloud computing, and document management have changed the traditional work environment and lessened the resistance to new models for performing back office tasks.
Outsourcing the entire accounting and finance department is not always appropriate, since many organizations need at least one internal staff person who not only acts as a coordinator with the outsourcing provider but sometimes performs basic data entry tasks. This position can be part time and usually does not require professional accounting skills. Larger organizations may want to retain someone on staff in a strategic CFO role, unburdened by having to supervise day-to-day accounting operations.
Personalities and organizational dynamics enter in as well. If the CEO wants immediate access to an accountant down the hall, or feels his or her prestige would be diminished by not having a full-time finance person, the organization likely is not a good candidate for outsourcing. We have realized that one size does not fit all and we adapt our service approach to best serve the needs of the client organization.
In future posts, I will further explore the specific benefits of NPOs outsourcing accounting, as well as some of the risks and downsides, both real and perceived. To learn more, go to our website services page.