Outsourced Accounting Makes NFPs More Efficient & Effective
Like many nonprofits, Midwest Shelter for Homeless Veterans (MSHV) relied on their own staff to manage their finances.
And, like many nonprofits, they found themselves balancing the financial management of their organization with the pursuit of their mission.
“Financial management of social impact organizations is key to growth. You need the right oversight and skills to achieve maximum effectiveness. How you balance that oversight expense – without losing the utmost investment in program impact funding – is a strategic challenge all organizations in our industry face,” says Christine Lewis, Executive Director of Midwest Shelter for Homeless Veterans.
As a result, staff found themselves spending valuable time on bookkeeping and other administrative matters. Management sought to find the guidance and information they needed to make key decisions. At the same time, building an internal accounting department with the proper skills, resources, and capabilities was a challenge, from both a staffing and budget perspective.
And as Midwest Shelter for Homeless Veterans grew, so did the burden of financial management.
Then they made a simple decision that changed everything: They outsourced their accounting to a trusted CPA firm.
“Outsourcing was transformative for our organization,” Christine says. By outsourcing, staff could focus optimal energy on fulfilling program goals. Meanwhile, management and the Board of Directors received timely month-end financial statements. With accurate, up-to-date information and guidance from knowledgeable CPAs, they could make decisions with clarity and approach audits with confidence.
“Honestly,” Christine says, “I think more nonprofits would outsource their accounting if they understood it and the powerful effects it could have on their program outcomes.”
The Power of Outsourced Accounting
We agree with Christine (and not just because her organization is our client).
Today, far too many nonprofits attempt to handle every aspect of their own financial management. It’s tempting to think this is a good way to save money. However, far from being efficient, staff at these organizations spend more time on administrative duties and tend to find themselves in over their heads.
In today’s blog, we’re taking a look at outsourced accounting for nonprofits: what it is, how it works, and how it helps organizations be more efficient and effective.
But first, let’s start with an important distinction that every nonprofit should know…
Bookkeepers vs. Accountants: What’s the Difference?
The terms “bookkeeper” and “accountant” are sometimes used interchangeably. But while they have some overlapping responsibilities, there is a big difference between the two roles and how they approach financial management.
A bookkeeper is primarily responsible for record keeping. They may manage your day-to-day transactions for accounts receivable and payable, as well as payroll, sales and more. They may also prepare basic financial statements, usually for recordkeeping purposes only. As the term suggests, bookkeepers keep the books.
An accountant takes a significantly more active, hands-on role in the organization. Whereas the bookkeeper keeps financial data organized, the right accountant will use data, along with industry experience and specialized knowledge, to help your management team make decisions and your business achieve its goals.
Accountants can serve as essential advisors to nonprofit organizations, helping them navigate the challenges of their industry, stay compliant, pursue growth strategies, manage cash, and forecast what’s ahead.
What Can the Right Accountant Bring to Your Nonprofit?
None of this is to downplay the important role that bookkeepers play at countless nonprofit organizations. Keeping accurate financial records is critical, and a good bookkeeper can help management stay focused on running their organization.
At the same time, bookkeeping is far from the only financial management service that a nonprofit needs, particularly when it’s a larger organization and/or entering a growth period. These NFPs are confronted with a complex environment of regulations and cashflow management. They need a wide range of services that are far beyond the capabilities and qualifications of bookkeepers (as well as some accountants, who essentially function as bookkeepers).
At D+L, our CPAs work directly with nonprofit management teams to:
- Provide forward-looking information, projecting the next three, six and 12 months of cash flow and determining whether it aligns with their organization’s budget. This arms clients with the foresight they need to make proactive decisions.
- Help organizations monitor cash flow by recording transactions in real time. Our team projects cash forward on a weekly basis to help manage short-term cash flow, while also conducting longer-term projections.
- Prepare clients for audits by performing bookkeeping, designing controls, assisting with oversight, and working with management.
- Organize expenses into buckets (financial categories), allowing our clients to see spend rates in key areas, such as employee costs or marketing. This gives organizations greater clarity and helps them make budgeting decisions at a macro level.
- Host monthly advisory meetings where our CPAs help clients understand their completed financials, cross-reference their spending with their budgets, monitor progress on KPIs, and discuss forward-looking financials and events. It’s important for our clients to not only have the right data on hand – they need to know how to use it.
- Create smart budgets based on industry insights, cash projections, and the unique goals and challenges of their business.
- Help organizations ensure compliance as they grow and pursue new opportunities.
- Maximize clients’ ability to provide mission-driven services in all economic climates and financial situations.
- Advise management on key decisions, such as when to hire new employees, how to best utilize their workforce, when to pay out bonuses and distributions, and what to charge customers. We help our clients run their organization more efficiently.
What is Outsourced Accounting?
Outsourced accounting takes all the services we outlined above and makes them available to your organization a la carte—so you can pay for the services you need, and nothing else.
At D+L, we offer three general categories of outsourced financial management services:
- Transactional (Bookkeeper-Level) Services, such as cloud-based bookkeeping, payroll, accounts receivable/payable, tax preparation, and expense reimbursements.
- Controller Services, such as financial reports, audit preparation, policies and procedures, and more.
- CFO Services, such as forecasting and budgeting, major business transactions, cash management, strategic planning, benchmarking, and more.
One of the best things about outsourced accounting is that you can get all the financial management services your nonprofit needs without hiring more staff.
That means you get the services and deep expertise of an entire CPA firm at a price you can afford. And, as your organization grows and changes, you can always adjust your scope of services to ensure that you get the support you need.
For nonprofits that are looking to scale-up, pursue grants and/or expand their offerings, that flexibility is priceless.
The Bottom Line
Nonprofits face an extremely challenging financial and regulatory environment. While bookkeepers can help organizations keep track of their data, most nonprofits need more sophisticated services than a bookkeeper can offer.
Partnering with an experienced accounting firm empowers organizations to achieve their goals, expand their reach, and pursue new opportunities.
Connect with D+L’s Trusted Nonprofit CPAs.
Dugan + Lopatka CPAs has decades of experience with large and mid-sized not-for-profit organizations. Clients trust us because:
- We work hard to understand your unique organization.
- We bring deep, diverse NFP and auditing experience to the table.
- We take a proactive, hands-on approach, working directly with your management team to achieve your goals.