Nonprofit executives must wear many hats. Not only are they responsible for fundraising to advance their organizational mission, but they may also be responsible for strategic planning, board communications, human resources, and recruiting, among other things.
More so than ever before, nonprofit leaders are under pressure to fundraise, manage operations, comply with state and federal regulatory requirements, and leverage resources cost-effectively.
The challenge of hiring and retaining talent is intensifying as the US workforce shrinks and wages increase. Most nonprofits do not have the resources to achieve all of this this in-house.
Roles like accounting, finance, marketing and IT require specialized knowledge to understand and implement scalable business processes. Unfortunately, due to budget constraints, many nonprofits may not be able to afford full-time, in-house resources. Just as importantly, many do not actually need full time resources.
Outsourcing specialized functions can help nonprofits control costs, update processes, and bring new ideas to the table that facilitate growth.
This trend is already taking hold in the small business sector. For profit businesses are increasingly turning to outsourcing functional areas that require specialized knowledge. Nonprofits can benefit from this approach as well.
This guide reviews some of the core functions that nonprofits should consider outsourcing and benefits associated with each. Additionally, we’ll discuss key considerations and questions to ask when vetting outsourced partners.
What is outsourcing?
Outsourcing describes delegating key areas, often back office services, to outside vendors or contractors. In most cases, this is on a long-term basis. The goal is to lower costs, improve management efficiency, and boost quality.
Outsourcing back office functions allows more time to focus on the organization’s mission. Experts guide the decision making and draw on specific knowledge and best practices. Additionally, internal employees have more time to focus on the core operations and long-term strategy.
Organizations are considering new strategies to improve operations, manage risks and regulations, and ultimately increase growth.
A Natural Extension of Your Business.
Options besides simply hiring internal staff are growing rapidly. Especially as concerns about losing control over these functions have proven to be unsubstantiated and vendors are able to provide a high level of service.
Outsourcing has evolved greatly in recent years. Today firms are set up to be a natural extension of your business. This can help organizations quickly become more strategic with qualified resources that understand the intricacies of the industry and can set up best-in-class processes.
While outsourcing may have begun as an initiative to cut costs, today’s providers can recruit and retain better talent than many organizations. In many cases, it may not mean getting rid of your existing staff, but instead using an outsourced provider to provide oversight, training, and expertise.
There is also added accountability and a level of reporting that can come from using a third party provider, which is particularly valued by the Board of Directors.
Here are some core functions that organizations should consider for outsourcing: finance and accounting, IT, grant writing, marketing and social media.
Finance and Accounting
Outsourcing accounting and financial management often is more effective than employing one individual to handle a broad array of accounting tasks of various complexity. It may also result in cost savings.
When you have the right expertise at your disposal, your outsourced vendor can do more than basic bookkeeping such as providing strategies for managing cyclical cash flow – a challenge for many nonprofits – and creating custom financial reports.
While an individual accountant may be able to pay bills and update the accounting file, they won’t be able to provide you with the opportunities and efficiencies that a full-service outsourced accounting / finance company will.
A full-service firm provides strategic financial advice, helping your non-profit organization save money and giving you the platform to deliver your mission more effectively.
Hiring an outside vendor that regularly works with nonprofits can also reduce theft and fraud with increased oversight. All organizations, large or small, need to have segregation of duties in their accounting department and outsourcing is a cost effective way to accomplish this.
Support for audits (scale, experience and flexibility) is another major benefit outsourced accounting firms provide to nonprofits.