Outsourced accounting is not a trend. It’s here and growing. Many turn to this solution as a way to decrease costs, free up capacity, and have access to greater resources. Even so, this still may not be the best solution for your organization.
Why Outsource Your Accounting?
There are certain state and federal requirements that trigger the need for an independent audit. State and local agencies can also request audited financial statements. Couple this with day to day financial management, limited staffing, and budget constraints most organizations cannot manage the demand and up falling severely behind. Choosing to outsource frees up capacity, cuts down on costs, gives in depth access to experts, and helps organizations take a more proactive vs reactive approach to financial management.
While there are many benefits, no solution is perfect. There are certain signs that highlight whether or not it's a solution that your nonprofit can and should take an advantage of.
You’re not ready to embrace technology
A key component of outsourcing your accounting is embracing technology. Being able to communicate via teleconferencing (ex:Zoom), utilize cloud software (ex: QuickBooks Online), integrations (ex:Bill.com), and partnering to ensure a collaborative approach in managing the organization’s finances. If you aren’t willing to embrace the cloud, it’ll make outsourcing your accounting very difficult.
Most Accounting firms that offer this level of service typically require that their clients are onboard with a certain level of tech. By doing so, you can work better together and streamline the accounting process. Let’s take bill pay for example. The old fashioned way of managing Accounts Payable consists of reviewing manual invoices, writing manual checks, and completing manual data entry/record keeping. By using a tool like bill.com, you automate the Accounts Payable process and give the bookkeeper back some of their time. Bills can be received and approved electronically which means the vendor gets paid faster. The tool integrates with QuickBooks Online and as a result can use financial intelligence to code the transaction. By implementing this one tool, you go from an extremely manual process to less storage, less time, and less paperwork.
You have limited bookkeeping needs
Let’s face it, some organizations don’t need to be supported by an outsourced team. If you are just getting started and have simple reporting requirements, outsourced accounting may be too robust for you. At this level, a bookkeeper or someone on the leadership team can usually keep up with the day to day finances. A word of caution here: Nonprofit accounting is complex and highly regulated. The slightest inaccuracy could cause you to be out of compliance and at risk. It is important that whoever is managing your books is well versed and can keep up with the changing reporting requirements.
We have past clients who came to us to set up a firm foundation for their accounting operations but then managed the upkeep themselves because their bookkeeping needs were very minimal. This too is an option for you if you find that your budget is fairly small and your accounting isn’t complex.
You’re not interested in a partnership
If you want a solution that you can set and forget, outsourced accounting is not for you. This is a partnership and requires give and take from both sides. The best partnerships require effort from both parties. Look at it from this perspective, if you were to hire an inhouse controller there would be expectations, expected deliverables, team meetings, professional development, etc. Your outsourced accounting team requires some of these same things just in a different capacity. Part of what makes us different at Visionary Accounting Group is that we consider ourselves an extension of our clients’ teams. We have a certain meeting cadence, we attend and present at their board meetings, we interact with other departments as needed, etc. Our clients appreciate this level of engagement and feel more comfortable with this arrangement vs outsourcing their Accounting to a company that they only hear from once a month or even longer.
Your current structure works for you
Maybe you already have a bookkeeper or a structure that works for you. No need in fixing what isn’t broken. Normally when organizations turn to outsourced accounting, it is because they're experiencing some discontent and are in need of a solution that will help them better manage the organization’s finances. If this isn’t the case for you, outsourced accounting isn't something you need to consider just yet.
You’re managing capacity needs well
Another reason nonprofit organizations turn to outsourcing is because they’re in a season of growth and can no longer keep up with the demands of such growth. Working in the nonprofit space requires a level of creativity that some may not be used to.There’s this notion of having to make the most out of a little. For that reason, you don’t want to jump to outsourcing too soon. There’s still a cost associated with it and if your organization is doing just fine managing its current load of funding sources, reporting requirements, and overall workload… this may not be the option for you just yet.
Clearly I am a huge proponent of outsourced accounting. More importantly, I'm a huge proponent of doing what makes sense for your organization. That means not taking on additional costs before you have to. It also means not breaking up an operation that does work and is giving you what you need. If outsourcing your accounting operations is something you’re considering, think about why. If none of these signs apply to you then maybe your nonprofit is ready and in that case, book a call to speak with us.