Outsourced accounting for nonprofits: A why-and-how guideAdele Chazin
Rare is the nonprofit that looks forward to finance and accounting tasks, from bookkeeping to budget reviews and reporting. At a minimum, such tasks are a headache, and sometimes – like during an audit – they can become the bane of any executive’s existence.
The difficulty of managing finances internally is a multi-layered challenge that nonprofits are increasingly solving by outsourcing their financial management tasks, either in part or in full.
Four reasons it makes sense:
- Lower personnel costs. Bookkeeping and accounting are both time-consuming and costly, in terms of facilities, IT, and staffing.
- Expert support. When you partner with an experienced organization, you get access to a broad array of experienced experts, from bookkeepers to CFOs, who you can take advantage of anytime your organization needs. Outsourcing can also reduce confidentiality issues that arise when multiple people in an organization have access to finance-related information.
- Continuity. Having an in-house accounting expert can be great right up until that expert leaves, taking years of knowledge with them. When you outsource, you eliminate that worry, along with hiring and training concerns – though be sure to look for a firm that provides cross-training and redundancy among staffers to ensure continuity of service. (More tips below!)
- The latest technology. Many nonprofits suffer due to finance and accounting technology that isn’t up-to-date or lacks needed features like real-time data access and customizable dashboards. Quality providers will guide you toward “best-of-breed” cloud technology, eliminating those IT headaches and giving you more time to spend interpreting data and reaching informed decisions.
Finding the right accounting partner
Of course, outsourcing accounting functions is a big deal: Just as you wouldn’t choose a new tax preparer or investment manager for yourself without some research, you’ll need to do your homework to find the right accounting firm to meet your nonprofit’s needs.
Here are five tips for evaluating a financial services provider:
No. 1: Make sure they know nonprofits. The nonprofit world is not the same as the corporate world. It has its own language, accounting standards, reporting requirements, and idiosyncrasies. Your partner needs to know the sector inside and out, so ask them how many nonprofit clients they have, and how long they’ve been serving nonprofits. If their experience is limited and doesn’t go back at least a decade, you might want to look elsewhere.
No. 2: Evaluate the value they can deliver. If outsourcing doesn’t add value to your nonprofit, it’s not worth doing. First, know which services you want to outsource: Full accounting support, periodic reviews, or something in-between? Do you need accountant-level or CFO-level support? Find out how much the firms will charge for those services and try to determine exactly how much added value they’ll bring your organization. Do they have experienced or expert advisors available? Do they have all the latest accounting products and resources? Will they create efficiencies?
No. 3: Assess their responsiveness. You need (and deserve) an accounting firm that will communicate clearly, respond promptly to questions, and provide added assistance when you need it. Even in your initial contacts with potential partners, keep an eye out for signs like unreturned phone calls and emails. Get a list of client references and ask them specifically about communication. Do they respond quickly? Do they provide timely, reliable support?
No. 4: Find out if they’ll prepare you for your audit. Audits can be incredibly difficult and time-consuming. Your partner should be preparing you for audits all year long – not at the last minute – and be able to hand auditors a well-organized, detailed, comprehensive package in advance of the audit. This is another topic to discuss with client references: How prepared for the annual audit are they? Does the firm save them time and ensure a smooth, well-planned experience?
No. 5: Keep learning. Making the right choice is always easier when you understand the subject matter, so be sure to take advantage of opportunities to educate yourself about nonprofit finances – from the fundamentals to of-the-moment policy changes and trends.
To that point, GCN partner Chazin & Company, a premier provider of outsourced accounting and finance solutions for nonprofits, will be hosting a free webinar for GCN members, Financial Accountability and Effectiveness for Nonprofits, on Feb. 5. Join in to find out about the changing standards of accountability among donors, and how your nonprofit can meet them.
Adele Chazin is Principal at Chazin & Company, a GCN business partner.
Chazin & Company is an outsourced accounting firm for nonprofits, offering a unique and respected approach to the audit process. By providing auditors with a comprehensive, electronic package prior to the audit, auditors work efficiently and independently, resulting in fewer client disruptions and lower audit costs.