Outsourced Accounting: Why It Works for Nonprofits

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When I used to think of “outsourcing,” my mind went to the short-lived TV show Outsourced and its comedy of errors. I cringed at the thought of working in that type of environment, where efficiency and expertise is often sacrificed by management for the sake of lower business costs. As my accounting career progressed, I experienced many different kinds of outsourcing, from large corporations with offshore accounting departments to organizations utilizing a shared service model across multiple geographic locations. My experience has led me to believe that outsourced accounting can be incredibly beneficial for nonprofit organizations - as long as it’s done right.

Many nonprofit staff - especially those in small or new organizations - have to wear many different hats. One person might have to juggle governance, finance, development, programs, HR, IT, and more. Even the most highly qualified and skilled employee cannot possibly perform all of these duties to the highest level. Your development director might be a magician when it comes to bringing in donors, but that doesn’t mean they know how to prepare financial statements. No one can be an expert in everything all at once, and the more thinly you’re stretched the easier it is to make mistakes.

Even larger organizations struggle when the talent that they have is not distributed properly. For example, a national nonprofit with multiple independent locations across the United States might have one office with a skilled accountant, but another office lacks anyone with formal financial education at all. If each office is responsible for all their own bookkeeping, this can create major problems. One solution to keep the organization’s financials on track is to implement a shared services model. This model allows the organization to consolidate all administrative tasks in a single office, with skilled experts in charge of each main function. This office then creates standardized policies and procedures for all locations, and is responsible for ensuring the highest quality and efficiency at each of the other offices nationwide. It’s essentially an internal version of outsourcing.

The shared services model can be useful for large or multi-location organizations. But what about small nonprofits, or those who are just getting off the ground? For an organization with limited employees, it can be valuable to outsource specific tasks or responsibilities to a third-party provider. Outsourcing often costs less than hiring additional staff, and provides the organization with independent oversight from experts in their field. And it improves the quality of the nonprofit staff’s work as well, by allowing them to focus on the areas that they’re best at.

Seeing how not-for-profit organizations benefit from outsourcing and shared services has made me a believer. Now when I think of outsourcing, I don’t think of inefficiency and miscommunication. Instead, I think of managing talent in a way that provides good for the organization. Outsourcing accounting or administrative functions can strengthen your internal controls, streamline your daily processes, relieve pressure on your staff, and ultimately help you be more effective in fulfilling the mission of your organization.