As a not-for-profit organization, growing your mission can sometimes be a double-edged sword. You become able to influence a greater number of people in a more significant way, but you also likely become bogged down in a more intricate web of policies, stipulations, and logistics.
The people you hired to handle the accounting may not be working in their strength zones, which costs your organization time and money. As the mission grows, so does the opportunity cost of doing your own bookkeeping. So rather than simply expanding those team members’ responsibilities, an often more-effective solution is to outsource to a bookkeeping company.
Common Reasons to Outsource
There are as many reasons not to outsource your accounting needs as there are to do so. However, not-for-profits can often save money and gain expertise by outsourcing in the following common situations:
- The accounting entries become more complex due to increased number of grants or number of compliance measures
- The organization begins offering additional programs that require tracking expense allocations
- The Executive Director needs a better understanding of how day-to-day operations affect the organization’s overall and long-term goals
- A new Executive Director wants a comprehensive review of records and financial statements to ensure accuracy and ability to maintain operations with the organization’s current financial status
- The organization’s board of directors is not involved in or lacks adequate accounting knowledge to make informed decisions based on financial statements
For non-profits, these changes or requests can overwhelm an accounting department that’s used to simple, routine processes. It often makes more sense to hire a bookkeeping company in these situations.
Benefits of Outsourcing Bookkeeping
Though it often makes more sense to hire a bookkeeping company when situations like these arise, it’s not always the right solution for every not-for-profit organization. However, in most cases, it saves money, increases available expertise, and lowers the risk for organizations growing beyond their current accounting setup.
The main benefit afforded by hiring a bookkeeping company to handle your day-to-day operations is the expertise and dedicated training of an outside team of accountants. Bookkeeping companies can stay on the leading edge of ever-changing regulations for non-profit financial reporting, and sometimes have working knowledge of your specific industry and/or mission.
In addition, outsourced bookkeepers provide a flexible schedule that works for your organization. They can also act as a controller or even CFO to review your current accounting team’s work and provide additional layers of controls in your accounting process. This is beneficial for both growing organizations and small start-ups.
Hiring a bookkeeping company may require an up-front fee or deposit, but this cost is minimal compared to the opportunity cost of searching for and training a brand new employee. Payroll for a team of in-house accountants tends to be higher than the cost of a bookkeeping company, and requires more oversight by the Executive Director or finance committee members.
Finally, since these bookkeepers aren’t actually employed on your payroll, it’s easier to break ties with the relationship if it doesn’t go as planned.
Reasons not to Hire a Bookkeeping Company
For small- to medium-sized non-profit organizations, hiring a bookkeeper is usually the best value for the cost. However, as the size of the organization increases, so do your accounting needs. At some point, it won’t make sense to pay a high retainer or hourly rate for the amount of work that needs to be done.
One rule of thumb is that once you require 40 hours of bookkeeping per week, hiring an outside company becomes more expensive than paying for your own controller.
Another less common reason to skip outsourcing is that you have already hired someone with expertise in this area; perhaps a CPA applies to join your team part-time, and can act as your bookkeeper. This allows you to avoid training costs and perhaps saves you from paying a full-time salary, at least until the needs of your organization grow further.
Choose With Your Mission in Mind
At the end of the day, your not-for-profit organization is mission-oriented. Some solutions may save your organization money, but have a negative impact on those you serve. Outsourcing to a bookkeeper may or may not allow you to serve others more effectively, and if it doesn’t, it may not be the right move for your organization.
As auditors, our passion is to serve organizations that serve others. We display this in being timely, relational, and prepared with our clients, as well as offering guidance in our areas of expertise. If you have any questions about outsourcing your bookkeeping, feel free to contact us. We’re here to serve!