The Benefits of Outsourced Accounting for Nonprofits


Small and medium-sized nonprofit organizations face a number of unique financial challenges as they look to stretch every dollar, often with tight budgets and few staff. Many of our nonprofit clients who provide services in the voluntary health and welfare sectors have a goal of spending at least 80% of every dollar on direct programs, while keeping overhead costs as low as possible. Much of the remaining funds are spent on fundraising efforts such as special events, capital campaigns, and annual mailing appeals.

As you might expect, there is often very little left in the budget to hire a qualified accountant who can properly track endowments and donor restrictions, correctly report expenses according to their functional classifications, track grant funds, and produce accurate and timely financial statements for the finance committee or board of directors. But the reality is that the governing body and management cannot properly function without proper accounting and financial statement reporting.

Many CPA firms (including Altruic Advisors) recognize the disconnection between budget and financial reporting requirements in small to medium-sized nonprofits. As I have seen in my 20 years of auditing nonprofits, this disconnect most often occurs when an organization is small but has very challenging accounting demands in areas such as tracking grant funds, endowment funds, and donor restrictions. Quite often, the organization cannot generate accurate and timely financial statements through the year and must rely on an external auditor to tell them their financial situation – long after the year has already passed. This delay can cause many problems for the organization, not to mention the independence concerns in relying on an auditor for this information. By utilizing a CPA firm for its accounting needs, nonprofit organizations can harness the experience and talent of CPAs who are solely devoted to the causes of nonprofit organizations and understand the nuances of nonprofit accounting requirements. When this is done on a monthly flat-fee basis, an organization can budget effectively – with no surprises.

Another reason to outsource accounting to a CPA firm is the firm’s ability to utilize cloud-based technologies. The firm can spread these large investments in the cloud among many nonprofit organizations, so the cost to each organization is minimal. The cloud offers many important functions, such as:

  • Enhancing internal controls by providing a means to electronically authorize vendor payments and separating this function from the check signing and accounting functions

  • Creating a safe portal for documents (think of it as an online file cabinet)

  • Reducing or removing costs associated with maintaining a server environment

  • Allowing for real-time access to the accounting file for staff or board members who may be in different locations (Yes, it’s a good idea to make that access “read-only!”)

  • Allowing auditors to access these online systems so that much of the work can be done at their office – not yours

While it can be tough to quantify the savings of outsourced accounting for nonprofit organizations, it’s clear that they can often be substantial. CCH (a major audit and accounting software provider) recently conducted a case study on Altruic Advisors’ use of their CCH Axcess Portal, and how we are using technologies like theirs to reduce our clients’ accounting and auditing costs.

No matter how you manage your accounting burdens, it’s important to have an accurate, independent, and timely system – both to fulfill your financial reporting duties and to ensure the long-term health of your nonprofit.