As the pace of change continues to accelerate, nonprofits are facing more challenges every day. It’s a complicated landscape, and that is why operations need to be as simple as possible. So, why do so many nonprofit leaders find themselves spending more time on day-to-day tasks and less time on the type of strategic thinking that will drive their organizations forward?
To be a true visionary leader, nonprofit executives need real-time financial information to make the right decisions that can embolden their organizations’ missions. Too often, nonprofit executives and the Board of Directors find that the financial information that they have relied on throughout the year to make decisions has been inaccurate.
If you’re trying to do everything yourself, have long-tenured key finance personnel retiring, or are facing constant turnover in your accounting department, it’s time to stop and find a partner who can give you the people, proven processes, and software to handle your finances so you can focus on strategy.
Let’s explore some reasons why nonprofit leaders need access to better financial data and how outsourced accounting services can help:
1. Lack of accurate financial information
Executives must make many strategic decisions throughout the year. These decisions can range from big, operational shifts like programmatic expansion to day-to-day operational decisions like liquidating investments to support cash flow. Unfortunately, there have been many cases in recent years where decisions were made based on bad financial information. Most nonprofits have an annual audit, and oftentimes the finance team “cleans up the books” in preparation for the audit. If this is what your organization is doing, you are going about it all wrong. Financial information should be reconciled throughout the year and your books should be closed on a monthly or quarterly basis. The worst-case scenario is that your organization thinks that everything is fine, until the year-end close where it becomes apparent that you had a large operational loss and the panic sets in.
Why does this happen? Generally, it is a lack of skilled financial personnel, which lead us into the next topic.
2. Lack of skilled financial resources
Having financial data that is as accurate as possible isn’t a luxury in the nonprofit sector, it’s a necessity. It takes just one error or omission to put an organization’s reputation or tax-exempt status in peril. Any noncompliance issues can jeopardize your grant eligibility.
But that’s where it gets hard for leaders. If your organization is like many nonprofits, you may not have the budget for a CFO, let alone a large, in-house financial staff. Even if you do, your budget likely pales in comparison to the for-profit down the street. And when staff turnover happens, that financial professional you trusted the most takes their expertise out the door with them, leaving you in a mad dash to hire someone new fast in a challenging job market.
During the pandemic, many experienced people retired, changed careers or left the work force for various reasons. Due to this and many other factors, over the past few years wage inflation has grown tremendously, but government funding to support nonprofits has not come close to keeping up. In fact, without federal stimulus funding, it’s likely that many states will face budget shortfalls in upcoming years, which will make it even more difficult to fund nonprofits. In many cases, this has created a “race to the bottom” when it comes to staffing. Many nonprofits have been more willing to take a chance on someone that does not have the necessary expertise to fill key finance positions, with the hope that the person will eventually grow into the role. While this may work sometimes, more often than not it creates a perpetual cycle of turnover within your accounting department. Frustration with unqualified key personnel can cause long-time employees to consider looking elsewhere for employment. You can’t afford to lose your best people, especially those who know the ins-and-outs of nonprofit finances and have the power to help your organization go further with limited resources.
3. Cost savings
Many people automatically think that outsourcing a service is going to be more expensive. Generally, in daily life, that holds true – if something is going to be more convenient and save you time, it is likely that it will cost more. However, that is not necessarily the case when it comes to outsourcing your accounting functions. When you consider the true cost of an employee, including benefits, the payroll costs can add up quickly. Additionally, there are hidden costs that occur during times of high turnover like the cost of training, onboarding, loss of institutional knowledge, and potential disruption to your operations.
Keep in mind that there are many large organizations with robust accounting departments that have the resources needed to maintain high quality accounting functions. No one is suggesting that those organizations eliminate the accounting department and outsource the function to save money. However, for those smaller nonprofits that are struggling to find qualified personnel and are frustrated with the lack of qualified resources, it’s time to consider alternatives.
Your fastest path to data-driven success: Partner up
At TBG, we provide outsourced accounting services that help nonprofit leaders recapture lost time, increase financial efficiency, improve data accuracy, and accelerate their mission’s success.
We’ll give you access to a team of qualified financial professionals who work with nonprofits of all sizes. We perform everything from core accounting functions to strategic financial analysis and virtual CFO services — all without breaking your budget. Best of all, outsourced accounting services can scale as your organization grows. We’ll serve as a true financial partner, helping you brainstorm new ways to expand your mission impact and accelerate your success.
Our services are powered by the best-in-class, cloud-native, highly secure Sage Intacct platform, giving you constant access to the timely, high-value financial information you need when you need it.
If you need further guidance or have any questions on this topic, we are here to help. Please do not hesitate to reach out to discuss your specific situation.
This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.