Clean, accurate financial records are essential for any company in any industry. But the complexities of a nonprofit create unique needs and challenges when it comes to bookkeeping and accounting. From meeting complex regulatory and donor financial reporting requirements, to properly accounting for and managing grant monies, and much more—it’s a complicated, time-consuming function and a major responsibility.
That’s why many nonprofits find it advantageous to outsource their accounting and bookkeeping services to an experienced third party. It’s an effective way to tap the expertise of professionals who understand the nuances of accounting for nonprofits and can help relieve your staff of the administrative burdens.
If you’re thinking about outsourcing your nonprofit’s bookkeeping and accounting, you may be wondering what factors should weigh into your decision. These 5 considerations can help you make the right choice about whether to outsource these critical functions.
1. By spending less time on bookkeeping and accounting, your team can devote more time and resources to your mission.
With budget constraints a constant reality, your nonprofit staff will inevitably wear many hats and juggle multiple responsibilities. The leaner your team, the more challenging it is to keep them from getting bogged down on tasks that don’t directly support fulfilling your mission. You want them focused on attracting and engaging with donors or developing and managing effective programs—not running payroll, paying invoices, and preparing financial statements.
Financial management is an important responsibility for your nonprofit, but it’s also a time-consuming task that can divert your team’s time and attention away from equally important functions. By outsourcing your bookkeeping and accounting, you can keep your team hyper-focused on what matters most to your mission.
2. Rather than try to attract experienced accounting professionals as internal employees, you can tap that expertise more easily by outsourcing.
A tight labor market has made it difficult for companies across the board to attract and retain top talent. As a nonprofit, you face the added challenge of competing with for-profit companies that often have bigger budgets and higher pay scales. Even if you succeed in finding a bookkeeper or accounting professional with the right skills and experience, you’ll need to devote time to training, onboarding, and managing that employee and provide health insurance and other benefits. The overhead burdens can escalate quickly.
By outsourcing your bookkeeping and accounting to a third party that’s already staffed with a team of highly talented professionals, you can avoid the time and costs associated with finding, managing, and retaining in-house employees for these crucial functions.
3. Finding professionals who understand the nuances and complexities of nonprofit accounting can be difficult when you’re hiring in-house, but not if you outsource.
Nonprofit accounting differs from for-profit accounting in many important ways. If you hire an in-house generalist who doesn’t understand grant accounting, hasn’t done IRS filings for a nonprofit, or isn’t familiar with the financial measures of success a nonprofit needs to report on, you won’t be happy with the outcome.
Instead, if you outsource your bookkeeping and accounting you can choose a firm that has deep experience working with nonprofit organizations. That means you can be sure the professionals doing your bookkeeping and accounting work understand exactly what your organization needs—and have a proven track record of getting it right.
4. If your bookkeeping and accounting needs ebb-and-flow throughout the year, outsourcing can help you better scale up or down.
Depending on the size of your nonprofit organization, you might not need a full-time bookkeeper or accountant year-round. Perhaps you have heavier needs during tax filing and reporting season, during annual audits or reviews, or at peak times related to your grant cycles.Flexing up or down to match fluctuating accounting needs is difficult when you hire in-house employees. By outsourcing your bookkeeping and accounting, you gain the flexibility to get year-round support at a level that matches your ongoing needs, with the option to scale up during peak times when you could use more help.
5. With highly experienced professionals handling your financial reporting, you can be sure to stay in compliance with complex reporting requirements.
Financial reporting is especially burdensome for nonprofits. IRS rules on reporting for 501c3 organizations can be among the most complicated, especially since your revenue sources may be less straightforward than a company that sells goods and services. For example, you might receive a mix of cash donations and in-kind contributions. At the same time, a large donor might have specific reporting requirements as part of their grant agreement, and your board will certainly expect timely, accurate financial reports to conduct oversight of your operations.It’s essential that you can provide each stakeholder with accurate, timely financials they can trust. But finding experienced employees who can handle that task is highly challenging. Outsourcing your bookkeeping, accounting, and financial reporting to a third party allows you to offload this time-consuming and complicated task to professionals who know what nonprofit financial reporting entails—keeping you in compliance without burdening your in-house staff.
Turn to the Nonprofit Experts at Scrubbed!
If considerations like these have you thinking about outsourcing your bookkeeping and accounting, Scrubbed may be the right fit. We’re the outsourced accounting and finance provider that hundreds of organizations—including many nonprofits—rely on for timely, high-quality services. The Scrubbed nonprofit team has extensive experience helping organizations just like yours. Our nonprofit services include handling daily bookkeeping, building and managing budgets, tracking donor-restricted funding, managing government grants, preparing grant reports, supporting audits, preparing IRS filings, and preparing statements of financial position, activities, functional expenses, and cash flows. We can augment your internal staff, help you through peak periods, or take on the entire bookkeeping and accounting function. Contact Scrubbed to learn more about our nonprofit accounting services, cost-effective outsourced model, and proven approach to delivering high-quality accounting and finance services.
