Driving outsourcing decisions for nonprofit organizations
Nonprofit organizations are significant contributors to the American economy. According to GDP data compiled by the World Bank, the global nonprofit industry were a nation and it would have the sixteenth largest economy in the world. In addition to the economic activity created by nonprofit organizations and the countless services that are delivered by them on behalf of government agencies, nonprofit organizations are also one of the largest employment providers across the country.
Charitable giving in general is closely tied to stock market performance, and the periods of extreme volatility over the last few years have a delayed effect on donors. As a result, many nonprofit organizations saw their personal and donor-advised fund balances decline in the last few years. However, lately charitable giving is on an upward trend and organizations across the sector are reporting increased number of donations, philanthropic help, and volunteers all over the country.
According to Giving USA 2017: The Annual Report on Philanthropy for the Year 2016, donations to U.S. charities has hit an all-time high of $390.05 billion. Overall, charitable giving donations saw a 2.7 percent increase in 2015. The graph below shows that the rise in total giving was largely driven by giving from individuals.
With more Americans opening up their wallets for charitable giving, there will be a growing abundance of cash available with most of the nonprofit organizations. However with this good news come words of caution:
"Money brings a lot of responsibility – now what you are going to do with it?"
An influx of cash for the nonprofit organizations will also mean more opportunities to invest in new strategies that further an organization’s cause and influence. Concurrently, this increase in donations will also bring with it a new set of challenges for organizations. The responsibilities on the back office functions like Finance & Accounting, HR, Payroll, IT etc. will dramatically increase and the nonprofit organizations may need to consider cost effective alternatives to managing these key organizational functions - all while assuring transparency, effectiveness and accountability to donors and the public. Outsourcing the back office functions such as accounting and payroll offers the potential advantage of reducing the scarce time and financial resources and management attention devoted to these areas, allowing management to focus instead on strategic decisions about new or existing programs and results.
Below are some of the benefits that can be realized by a nonprofit organization by outsourcing the Finance and Accounting, HR and Payroll functions
- Benefit #1: Access to the latest technology
Organizations need robust and up-to-date general ledger software to maintain the efficiency of their finance and accounting activities such as payroll and bookkeeping. Keeping technology updated with the latest version or upgrade can create an additional expense for a nonprofit organization. Outsourcing partner will offer access to the most updated technology, along with highly trained training staff that knows how to leverage the technology to your nonprofit organization’s benefit.
- Benefit # 2: Availability of skilled personnel
Finding and keeping dedicated and experienced staff for their finance and accounting department can be costly, while using an outsourced providers can allow access to subject matter experts who operate as an extension of their team. These experienced resources will implement stringent internal controls and stay up to speed on GAAP standards and other compliance requirements, reducing the risk of non-compliance and audit findings.
- Benefit # 3: Timely financial information for management.
With an outsourcing partner who is solely focused on providing your nonprofit organization financial and accounting services, you will receive timely and error-free financial reports. This enhances decision-making for your leadership, and allows your team to focus on the organization’s core mission. The financial insight and high level analysis provided by the outsourcing partner will also ensure that targets/metrics on fiscal compliance are met and reporting requirements are timely and accurate.
With more and more nonprofit organizations realizing these benefits, outsourcing seems to be the latest trend and the buzz in the nonprofit industry. The key to success is to partner with an experienced industry expert who can provide efficient services at a competitive price.
Quatrro is a market leader in providing finance and accounting services across the nonprofit industry through a combination of cutting-edge technology, flexible service delivery and domain expertise. Our services help nonprofit organizations establish and maintain strict schedules to meet the critical reporting requirements for public funding sources, and ensure the organization has complete insight into the financial position. From internal operating statements to funder reporting, from accounts payable processing to audit preparation; Quatrro offers specialized accounting services for the nonprofit sector through our Shared Service Center that translates to more efficient cash flow monitoring and reporting. With more than 24 years of experience in providing accounting services to nonprofit organizations, Quatrro can handle day-to-day operations and ensure timely reporting. If you are a nonprofit organization looking to outsource your finance and accounting activities, please contact us.