Outsourcing accounting and finance

Nancy McGee | September 12, 2008

Nancy McGee

Nancy McGee discusses options for outsourcing accounting and finance functions in a smaller nonprofit.

One reason many nonprofits think about outsourcing their accounting and finance needs is for internal control purposes. Particularly if you have a small staff, it's hard to have the appropriate checks and balances in place without an independent person looking over your shoulder.

Even with larger organizations, if there have been any kind of issues internally related to the financial system, such as theft or embezzlement, an outside eye is often a good idea.

Sometimes an organization has a very qualified chief financial officer, but because they don't want to invest all the resources to have multiple people on staff, they outsource particular pieces of it, so the chief financial officer can concentrate on forecasting and other broader-picture questions.

Options for outsourcing

Certified public accounting firms, if they're bigger than a one-person shop, will usually have a service for outside accounting. There also are freelance bookkeeping firms that keep books for lot of different companies.

As a note of caution, I would highly recommend that a nonprofit not ask an accounting firm to do its bookkeeping if that firm is already handling the audit function. There are some firms that say they can keep the two independent, but it's not a good business practice.

A good way to find a solid outsourcing option is through word of mouth. I checked with three or four nonprofits I knew that were outsourcing at least a piece of their financial work before I started contacting firms.

Make sure that the person you choose has experience with nonprofits. Get three or four nonprofit references and check with those organizations just to see if they've been pleased.

If you cannot find someone with nonprofit experience, make sure that you're prepared to provide some training. Reading material is a start, and some groups bring in an accountant quarterly who has a lot of experience with nonprofits, just to make sure their permanent person is on track.

The executive director should be keeping a close eye on finances no matter what, but a lot of nonprofits have self-taught directors to go along with their self-taught bookkeepers. You don't want to wait for that audit to make sure the books are straight.

Nancy McGee is CEO of the Alliance for Nonprofit Excellence based in Memphis, Tenn.