Key Financial Management for Nonprofits: Outsourcing Tips

Accounting and bookkeeping are often used in the same best practice to hire or outsource for nonprofit accounting conversation because they are both critical to managing finances. When mapping out your process, it’s helpful to understand how accounting and bookkeeping work together and how they differ. Strong nonprofit accounting is a foundational element of how to run a nonprofit. Whether you’re in charge of the numbers or not, keeping a pulse on your organization’s finances is always a smart idea. Now, let’s dive in to learn more about our favorite outsourced accounting firm— Jitasa.

Statements of Financial Position

• For the project to be successful, the relationship between the nonprofit and the outsourced team has to be good.
• Experience the knowledge of our top professionals with timely notifications about industry-specific changes through our insights resource page.
• In contrast, for-profit businesses focus more on making a profit and usually don’t have to follow as many rules about how funds are spent.
• As a nonprofit, you face the added challenge of competing with for-profit companies that often have bigger budgets and higher pay scales.
• Just as the basis for any job should start with a clear understanding of the role’s objective and what it will entail, the same goes for creating offshoring job descriptions.

Chances are, you didn’t start working for a nonprofit organization to fill out tax forms, track your budgetary expenditures, and worry about finances. The firm initially switched to offshoring project by project and then decided to become the employer of record for its India staff. The firm hired one employee in India they had worked with the year before who was groomed to become team leader, recruited eight others, and took over onboarding, training, and managing the offshore employees.

Cost-Effective Solutions

Discover the advantages of outsourced accounting for nonprofits, factors for choosing the right provider, and cost considerations. From setting your financial goals to ensuring adequate revenue, it all starts with your donors. Just like for profit accounting relies on customer data, donor management is a crucial element of your accounting strategy for this reason. Nonprofit accounting under GAAP requires organizations to maintain four critical financial statements. These financial reports should be your top priority to maintain a smooth accounting operation and get everyone on the same page.

• Additionally, dozens (literally) of insurance coverage gaps were identified that would never have been without the work of NRMC.
• By alleviating the burden of in-house accounting, you can allocate valuable resources more strategically, amplify your impact, and ultimately achieve greater mission success.
• Fund accounting requires your organization to categorize finances and allocate them according to restrictions and budgetary needs.
• The accountant should understand how to manage and report on various funds, including restricted and unrestricted funds, to ensure transparency and accountability.
• Bookkeepers organize financial records, while accountants interpret and further analyze that information.
• There are a few critical factors nonprofits must evaluate when selecting an outsource accounting services for nonprofits.

How To Choose the Right Outsourced Accounting Provider for Your Nonprofit

Once you have accurate financial data, you’ve got to be able to make sense of it. Talk to our experts and learn more about the services and expertise that can drive growth to your business. They cover tasks like approving spending, tracking donations, and managing bank accounts. Clear records show that you’re following the grant rules and using funds properly, which helps with compliance and opens doors to future funding. That means carefully tracking things like restricted funds, unrestricted funds, grants, and donations—making sure each one is used exactly as intended. In contrast, for-profit businesses focus more on making a profit and usually don’t have to follow as many rules about how funds are spent.

Paid student-athletes: Tax implications for universities and donors

Generally accepted accounting principles are a best practice for non profit accounting and determining financial health. In the event of audited financial statements, transparent financial records are vital. Financial transparency is integral to an annual tax form and reporting your nonprofit’s budget.

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. Rather than try to attract experienced accounting professionals as internal employees, you can tap that expertise more easily by outsourcing. Nonprofits must discuss software options with shortlisted firms and evaluate features like ease of use, reporting capabilities, integration with other systems, and costs. Managing finances in-house requires employing full-time accountants and bookkeepers.

Many charity rating organizations will also look at this form to evaluate your organization’s financials. To align with Form 990, you’ll categorize expenses as program, administrative, and fundraising during your nonprofit accounting process (more on that in the next section). A nonprofit’s Statement of Activities is like a for-profit income statement in nonprofit accounting. You’ll list revenue and expenses accrued over the year and create alignment with any restricted funds. Maintaining the following four financial statements will help you stay compliant with any audits, prepare for tax season, and understand organizational health at all times.

The accountant should be knowledgeable about these regulations and have a robust process for ensuring compliance. Ensure your provider has robust security protocols in place to protect your financial data. These include data encryption, secure file sharing, and strict confidentiality agreements. Compare pricing structures and ensure that the services provided align with your budget. From fundraising campaign management to productivity, explore our top free picks. Accounting involves close attention to detail and a deep understanding of the organization.

Enjoy Expert Advice and Support

Our entire team is focused solely on nonprofits, and every service we offer—from audit assistance to grant management—is designed with nonprofit compliance and reporting in mind. A bonus of working with a nonprofit accounting service, like The Charity CFO, is that we’ll file your IRS form 990 for you. Plus, we can tell you what other taxes you might have to file or pay depending on your location and operations, like state taxes, sales taxes, or payroll taxes. An experienced accountant will help you navigate nonprofit payroll challenges.

Outsourcing Payroll Services for Large Businesses: A Comprehensive Guide

The new cloud accounting software solutions organize and analyze data in real time and facilitate cooperation between nonprofit organizations and outsourced specialists. In addition, these tools improve the quality and safety of the financial records to meet the industry standard. Hiring and maintaining an in-house accounting team requires significant financial investment, including salaries, benefits, training, and ongoing professional development. By outsourcing, nonprofits can access experienced accounting professionals at a fraction of the cost, often paying only for the specific services they need.

The streamlined cost structure aids nonprofits’ sustainability and reallocation of resources to their mission activities. There are a few critical factors nonprofits must evaluate when selecting an outsource accounting services for nonprofits. The accountant should understand how to manage and report on various funds, including restricted and unrestricted funds, to ensure transparency and accountability.