Pros and Cons of Outsourcing Your Accounting Needs
posted Feb 10, 2017 by Patrick Martin, CPA in the Mission Matters Blog
An important decision nonprofit organizations face is whether or not they should outsource functions that fall under the accounting and financial umbrella. What are the potential advantages?
Why would you outsource?
Often times, organizations will outsource work in areas that require a significant number of hours or specialized knowledge. Areas like payroll processing and tax prep can be outsourced, which allows organizations to access a higher level of expertise and more resources. A lot of NFPs turn to outsourcing during times of major personnel transition or if workload increases.
What kinds of functions can outsourcing cover?
- Reconciling accounts at the end of each month
- Processing payables, receivables and cash transactions
- Preparing financial statements, budgets and forecasts
- Assisting with tax and grant reporting requirements, and
- Properly communicating financial matters to your board
- Review of account reconciliations
- Reporting financial results to funders and the board (enhance internal controls)
Do you have to outsource all of these functions?
It all depends on your budget and your needs. You should outsource only the functions that make sense for your organization.
What are the downsides to outsourcing?
Some common concerns....
- Availability- Some are hesitant to outsource due to the concern that the outsourced accountant might only be in the office certain days, meaning there won’t be a CFO or business manager to come to whenever a financial question arises.
- Time commitment- During the outsource transition, you must be prepared to spend some time making sure the outsourced person is well-read in your policies, systems and procedures.
- Significant financial decisions still rest on you- Outsourcing can assist and advise you on financial decisions but the governing body of your organization (board of directors most likely) will still be responsible for giving “the last word” on financial matters.
How much does outsourcing cost?
It all depends on your organization’s size and complexity. It might compare roughly to what you’d pay an experienced accountant internally. But, the plus here is that outsourcing will spare your establishment the cost of payroll taxes and health insurance (expenses for a regular employee). You might also experience reduced fees for audit and tax services with outsourcing because of the expertise and professional attention to detail given during the year.
Questions on outsourcing? Contact us.