Outsourcing Accounting: Should-Ask-Questions For Nonprofit Boards
How Do You Make Accounting Important To Your Board?
Typically accounting is not considered a mission-critical area of focus to a nonprofit board. Accounting is not what a board typically focuses on, but what if it did focus on ensuring your organization had best-in-class accounting technology and expertise?
Most not-for-profit back office processes, such as accounting and payroll, are at the discretion of the organization’s executive director (ED). The Board trusts their ED to hire a terrific CPA that will handle the taxes with the help of the organization’s fastidious bookkeeper, who can provide the CPA with everything they need to complete the year-end financials.
Accounting is an administrative task that the Board can leave up to the ED. That is, until, the ED wants to improve the performance of your organization’s administration or address budget constraints by outsourcing accounting.
Outsource Accounting To Meet The Mission
Mission drives everything that nonprofits do. In order to make the impact that your organization’s mission requires, your organization’s finance and accounting have to “meet the mission” too.
Sometimes, a nonprofit needs to expand its operations rapidly to address immediate and devastating needs such as a loss of beds for foster children needing high-levels of care, a natural disaster, or a sweeping change in the law of the land. Other times, a nonprofit’s funding landscape contracts because of the economy, staffing challenges, or public relations issues. It may seem counterintuitive to a board that is not normally reviewing the organization’s accounting, how many organizations outsource their accounting in order to save time and money.
Outsourced accounting is something that every nonprofit organization should consider in order to increase efficiency, introduce time—and money—saving expertise and technology, and alleviate the oversight burden placed on the ED. Imagine what your ED could do with those extra 10-20 hours spent on the year-end financial statements? That could be 10 one-hour visits with major donors or 20 hours on evaluating programs or more time to spend with partners developing the change that your mission strives for every day.
Begin to view accounting as a critical part of sustaining a nonprofit. Without the ability to accurately track program costs there is little hope of creating next year’s budget without suffering some consequences such as noncompliance, investor dissatisfaction, and missed opportunities to scale due to budget constraints and lack of access to a bigger financial picture.
Too often, not-for-profit EDs are not seeking the expertise or advice of their board when it comes to budgeting and financials. This is a mistake.
Not to worry, though. It is an easy one to correct. Start the conversation with your board about taking advantage of opportunities. We will get into what questions your board should be asking—Should Ask Questions or SAQs—about outsourcing accounting, bookkeeping, payroll, and CFO.
Hopefully, by this point, accounting should seem like something that ought to be very important to your board, if your organization wants to change the world.
SAQs For Nonprofit Boards (Not) Considering Outsourcing Accounting
One reason that accounting is not discussed all that often by the board is that it’s…esoteric. The definition of esoteric is 1. understood by or meant for only a select few who have special knowledge or interest or for the initiates of a group; recondite.
Accounting is definitely specialized, and it can do much more—when done right—to strengthen a nonprofit’s current operations and future goals.
Accounting processes and procedures, though recondite, can be the difference between having an impact and changing the game altogether when coupled with expertise and best-in-class accounting platforms. Nonprofit boards have a fiduciary responsibility to ensure proper financial management that ensures funds use matches that of the donor’s intent and the stated mission of the charity. Board members and leadership need more than a P&L sheet to advise the ED and provide exceptional oversight of the organization’s assets.
Change is hard. Real change means questioning how you are doing things and asking yourself, how could you be doing it better?
Making accounting and finance important to your board (and not just your treasurer) can feel like a daunting task. To get your nonprofit started down a path to transformational financial insight, here are four key questions your board should be asking when considering outsourcing accounting:
Four Big SAQs for a Nonprofit Board Before Outsourcing Accounting
- What will be gained by outsourcing accounting?
- What are the total costs of outsourcing accounting to our organization?
- How would outsourcing accounting change our organization’s financial outlook?
- Who would be impacted by outsourcing accounting, and how?
Engage Your Boards To Change Their Minds About Accounting, Or Anything
When discussing outsourcing accounting, you have an opportunity to engage your board. When you present your board with a clear vision of the impact that is possible with enhanced financial management, compelling data of the costs and the opportunities, and a little bit of FOMO, or “fear-of-missing-out”, on greater efficiency, reach, and impact you will change their mind about how important (and fun!) accounting can be for your organization.
BoardSource posted an article on nonprofit best practices that is worth considering when talking about doing something differently in order to dramatically improve your organization’s impact on the world. The article posits:
“…it’s often a fresh perspective that generates breakthrough solutions. New product applications (think back to sticky notes) that completely revitalize a business and generate answers to difficult problems can come from sources with no apparent connection to those struggling with a tough challenge…”
You can make accounting important to your board. By asking your board to discuss our four SAQs on outsourcing accounting, you will be on a great path toward improving your organization’s operations and financial future. You will ignite possibilities for impact, and that is truly exciting to your most valuable volunteers and advocates: your board.
mAccounting is ready to answer your board’s questions on how and why outsourcing accounting is right for your organization. Call on us, anytime.