Nonprofits of the Future: Outsourcing Peripherals to Double-Down on Mission

  • Impacts of financial decisions
  • 9/15/2021

In a world where change is constant and compliance issues are complex, nonprofits must be able to adapt. Sometimes finding support in key areas across your organizat...

Key insights

  • Many nonprofit leaders are pulled in opposing directions, trying to navigate the needs of the business while staying true to the mission.
  • Having support in key areas of your organization can help you focus on your most pressing business decisions.
  • Outsourcing services can bring additional knowledge and professional resources scaled to meet your needs.

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As the U.S. population continues to age, the number of nonprofit leaders moving toward retirement isn’t slowing down. Over the next 5 – 10 years, many organizations will be dealing with leadership transitions. Couple that with a continuing labor shortage and finding and keeping good people will continue to be a top five leadership challenge.

As the market for quality leaders becomes more competitive, consider other options to support your management and operational functions. Let’s unpack the future of outsourcing and its potential for nonprofit organizations.

Nonprofit outsourcing opportunities

Many management functions can be outsourced, including financial accounting, human resources, and information technology. In some nonprofit sectors, such as small associations, outsourcing all operations has become common.

Think about traditional back-office functions, which require specialized skills and knowledge — it can be difficult to attract and retain such professionals, particularly in a nonprofit setting that may offer fewer growth opportunities than for-profit organizations. Additionally, responsibilities in these roles are constantly evolving as legislation, the market, risks, and other external forces change.

Benefits of outsourced services

People are your greatest assets

Nonprofits strive to fulfill their missions each day, and their hardworking, front-line employees help make it happen. However, nonprofits often run extremely lean with severe budget constraints, making it difficult to bring on additional talent or free up leadership capacity. That means smaller management teams take on more responsibilities to keep the organization running, which can create more stress and potential turnover.

Outsourcing some functions allows leadership teams to focus on their programs, fundraising, and driving the mission forward. Leveraging experienced professionals can be more cost-effective than recruiting and hiring a full-time employee with salary and benefits. While hourly rates for outsourced providers are typically higher than the per-hour rate of a full-time employee, outsourced providers can leverage teams, use technology, and often provide needed services in fewer hours. That can equate to a similar or more affordable option.

Regulation and compliance

With the pandemic came new legislation that created opportunities and challenges for many nonprofits. When you understand how legislative changes impact your organization, you can adapt more quickly and precisely.

Yet keeping up with these changes, rules, regulations, and compliance has only increased in complexity. And time spent trying to interpret these changes diverts attention away from your mission. Often, outsourced providers have greater capacity and experience around legislation, standards, and reporting changes.

Quality mindset and innovation

Due to cost constraints, nonprofits can be among the last to implement changes to technology, infrastructure, security, and process efficiencies. Additionally, nonprofit accounting typically has much higher regulatory and compliance complexity than a for-profit of similar size, which can mean a greater investment in accounting and finance.

Having a third-party perspective can help your organization operate more efficiently, provide more transparency, and become more effective at serving the mission. But it’s not just about filling holes and job functions. It’s also about increasing your organization’s quality mindset.

Outsourced professionals look for ways to increase automation, find efficiencies in recordkeeping, and enhance security measures. It’s about finding opportunities to use tools to work smarter, not harder.

Consider financial recordkeeping and audits. Many nonprofits must have some level of assurance their finances are adequately tracked and maintained. Outsourced professionals can help determine whether your financial recordkeeping processes and controls are in place, potentially reducing the time and cost of the audit. The cleaner the finances, the less time auditors need to complete their procedures.

Scalability and flexibility

Many nonprofits experience seasonality in their programs, memberships, and fundraising, and the need for outsourced professionals may vary throughout the year. Large nonprofits may only need assistance during their peak program season whereas smaller nonprofits may leverage an outsourced financial executive with CFO-level insight on a recurring basis. With outsourcing comes scalability and flexibility — and comfort knowing you have capable assistance at your fingertips.

When to consider transition

Today, many organizations look to outsourcing when a transition is already underway, perhaps driven by the departure of a key finance leader or challenges with the current function. For a smoother transition, explore outsourcing options (potentially through an assessment) in advance and have a transition period with outgoing team members.

Additionally, “outsourcing” doesn’t have to mean eliminating all in-house roles. It may be better to use a blended approach, with some functions retained in-house and others outsourced.

How we can help

Nonprofits may not have deep experience in financial accounting, cybersecurity, human resources, or information technology — but these support functions are critical to your organization’s success. Whether you are considering outsourced professionals now or in the future, CLA is here to help. The following outsourcing services can be customized to accommodate your needs:

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