For nonprofits, it’s all hands on deck to fulfill the organization’s mission. Often budget constraints force nonprofits to run lean and have leaders assume multiple roles, such as fundraising, operations management, compliance, and human resources. But certain roles like accounting, marketing, and IT require specialized knowledge, and outsourcing these functions can help your nonprofit successfully achieve its mission while controlling costs, improving processes, and facilitating growth. Here’s a look at how outsourcing your nonprofit’s accounting services can benefit your organization.

Controlling Recruiting & Retention Costs 

Recruiting and retaining employees is increasingly difficult for all organizations, especially nonprofits competing with increased wages and benefits offered for accountants in the private sector. Costs associated with hiring and maintaining an in-house accountant also include employment taxes, health insurance, worker’s compensation insurance, vacation time, sick time, and other leave. 

When you outsource your accounting, you avoid not only the costs of recruiting and retention but also eliminate the costs associated with training, managing, and increasing salaries. You have immediate access to accountants that can help you achieve your needs. Also, you may find that you do not require full-time support and can work with your outsourced provider to tailor the level of services to the organization’s needs on an ongoing basis. 

Complying with Laws Regulations

Although most nonprofits are tax-exempt, these organizations are still required to file 1099’s and other information returns. An outsourced accounting services team along with your CPA can help ensure accurate tax reporting by reliably maintaining your books and records throughout the year. And if your organization has Unrelated Business Tax filing obligations, they can also help you navigate that process. 

A specialized outsourced accounting service team can also help you comply with revenue recognition rules around donations with and without donor restrictions, including when to release them. They can assist with recording the value of donated gifts, how to record multi-year contributions, exchange transactions, and unconditional contributions.

Improving Processes/Facilitating Growth

When you outsource accounting and bookkeeping services to a CPA firm specializing in the nonprofit sector, you benefit from their technical knowledge and expertise. They can help you update your processes, provide enhanced internal controls, ensure effective and efficient bookkeeping, and provide standardized reporting and assistance with compiling annual audit documentation. In the process, they often help uncover non-essential expenses that can be eliminated and create cost-saving efficiencies that the organization can adopt.

The outsourced accounting team can collaborate with your executive team to create a robust budget with the appropriate level of complexity for your organization. Budgeting effectively will give you control over your finances, allow for cash flow planning, and ultimately enable organizational growth.

Utilizing outsourced accounting services in your operating model has multiple benefits for nonprofit leaders. It can free you up to focus on building engagement, attracting more donors, boosting your fundraising efforts, and furthering program development and delivery. As a nonprofit leader, if your goal is to “wear less hats” and put more time into fulfilling the organization’s mission, this could be your solution. 

Contact LGA

The outsourced management accounting team at LGA helps nonprofits by providing outsourced accounting, audit preparedness, designing internal controls, and communicating the organization’s financial health through annual reports, an audit or review, and tax preparation. I’m happy to help you with a plan to meet your organization’s accounting needs. If you’re ready to talk about your strategy, contact me today. 

by Karen Barnard, CPA, Manager, Outsourced Management Accounting