When to Outsource Your Accounting (and What to Look for in a Partner)

Your organization’s accountant just submitted their resignation. The job posting you’ve run for six weeks has generated exactly two responses, neither from someone with nonprofit experience. Meanwhile, your Form 990 deadline approaches, your board keeps asking for financial reports you can’t produce and you’re pretty sure your grant compliance documentation isn’t where it needs to be.

If this scenario feels uncomfortably familiar, you’re facing the same challenge many nonprofits are wrestling with right now. The accounting profession is experiencing a severe shortage, and the organizations that depend on donated funds are feeling the impact more than most.

Understanding the Staffing Crisis

The numbers tell a sobering story. According to the National Council of Nonprofits, about 75% of CPAs reached retirement age in 2020. The pipeline of new accountants has shrunk dramatically. Accounting degree completions peaked at 80,000 per year in 2015 but dropped to 73,000 by 2020. Between 2016 and 2021, new CPA candidates fell by 33%.

Nonprofits face particular difficulties in this environment. You’re competing for talent against businesses and government agencies that can offer higher salaries. The specialized knowledge required for nonprofit accounting, from fund accounting to grant compliance, makes finding qualified candidates even harder. Audit firms dealing with their own staffing shortages have raised prices substantially. Some firms have stopped serving smaller nonprofits entirely because they lack capacity.

Recognize When You Need Help

Several clear indicators suggest your organization has outgrown its current accounting approach.

Staff Turnover Creates Crisis

Your sole accountant leaving creates an immediate crisis. When you can’t find a replacement quickly and your remaining staff lacks the expertise to fill the gap, financial operations can break down fast. Missing deadlines, incomplete reporting and compliance errors become real risks.

Mission-Critical Staff Handle Accounting

If your executive director or program staff regularly get pulled into accounting tasks, your mission suffers. People hired to serve your constituents shouldn’t spend hours reconciling accounts or trying to understand grant reporting requirements. This misallocation represents a hidden cost that goes well beyond the time spent on spreadsheets.

Compliance Keeps You Worried

Compliance concerns should keep you awake at night only if you lack confidence in your systems. Nonprofit accounting involves restricted fund tracking, segregation of duties, OMB Uniform Grant Guidance compliance, accurate Form 990 filing and potentially single audits. Mistakes in any of these areas can jeopardize your funding or tax-exempt status.

Board Questions Go Unanswered

Board members need timely financial information to make sound decisions and fulfill their fiduciary responsibilities. If you consistently struggle to provide clear answers about your financial position, cash flow or program costs, you’re limiting your organization’s strategic capacity.

Growth Exposes Weak Systems

Growth often exposes weaknesses in accounting infrastructure. When expanding programs, new funding sources and increased transaction volumes strain your systems, you’ll notice. Late financial reports, frequent errors and inability to provide detailed program-level data all signal that your accounting capacity hasn’t kept pace with organizational growth.

What Outsourcing Actually Provides

Moving accounting functions to an external firm addresses these challenges in practical ways.

Specialized Nonprofit Expertise

Fund accounting, grant compliance, unrelated business income tax considerations and nonprofit reporting standards require specific knowledge. Firms that focus on nonprofit accounting bring experience from working with hundreds of organizations. When you encounter a complex question, they’ve likely solved similar problems before.

Built-In Continuity

Continuity matters more than most organizations realize until they lose it. With an outsourced partner, you’re never one resignation away from chaos. If someone on your account gets sick, takes vacation or leaves the firm, another qualified professional steps in immediately. No scrambling for temporary coverage, no lost institutional knowledge and no service interruptions.

Current Regulatory Knowledge

Staying current with regulations requires constant attention. Accounting standards change, and nonprofits face evolving requirements from funders, regulators and the public. An outsourced firm makes keeping up their responsibility. They monitor changes, pursue professional development and implement new requirements across their client base. You benefit from this institutional knowledge without having to build it yourself.

Access to Better Technology

Technology access often favors larger organizations that can afford sophisticated systems. Outsourced firms invest in accounting software, data analytics tools and specialized applications that their clients couldn’t justify purchasing independently. You gain access to these resources as part of your service relationship.

True Cost Comparison

Cost considerations extend beyond the monthly fee. When you compare the fully loaded cost of hiring staff, you’re looking at salary, benefits, payroll taxes, recruiting expenses, training time, workspace, equipment and turnover costs. An outsourced relationship typically offers a fixed monthly fee that covers all these elements. You’re also buying fractional access to senior-level expertise you couldn’t afford to hire full-time.

Evaluate Potential Partners

Finding the right firm requires looking beyond price to assess factors that determine long-term success.

Nonprofit Experience and Expertise

Deep nonprofit experience matters because your accounting needs differ fundamentally from those of businesses. Ask potential partners how many nonprofit clients they serve, what size organizations they work with and whether they have staff dedicated specifically to the nonprofit sector. Firms that truly understand your world will speak your language and anticipate your concerns.

Credentials and Team Depth

Credentials provide a baseline for competence. Look for CPAs with nonprofit experience and ask whether the firm includes professionals familiar with single audits, Form 990 preparation and grant compliance. The depth of their bench matters too. Can they scale services as your needs change? Do they have enough staff to ensure continuity?

Communication and Accessibility

Communication style affects your daily experience. During the evaluation process, notice how responsive potential partners are. Do they explain concepts clearly? Are they accessible when you have questions? Will you have a dedicated contact person or get routed through a general queue? These seemingly small factors significantly impact working relationships.

Service Flexibility and Scalability

Service flexibility allows the relationship to grow with your organization. Some nonprofits need full outsourcing where the firm handles everything. Others want help with specific functions while keeping some tasks in-house. The best partners offer scalable solutions, whether that’s à la carte services for particular needs, fully outsourced accounting for comprehensive support or CFO-level services for strategic guidance.

Technology and Systems

Technology capabilities influence efficiency. Ask what accounting software they use and support. Can they integrate with your existing systems? Do they provide online access to your financial data? How do they handle document sharing and approvals? Modern firms use cloud-based systems that give you real-time visibility into your finances.

Make the Transition Work

Once you’ve selected a partner, the implementation phase determines whether the relationship succeeds. Start by documenting your current processes thoroughly. Who does what? What are your deadlines? Where do things typically go wrong? This documentation helps your new partner understand your situation and identify improvement opportunities.

Set clear expectations from the beginning. What services will they provide? What remains your responsibility? What are the deliverables and timelines? How will you communicate? Who are the key contacts on both sides? Getting these details in writing prevents misunderstandings later.

Plan for an adjustment period. Your new partner will need time to learn your organization, and you’ll need time to adapt to their processes. Build in extra time for the first few months. Schedule regular check-ins to address issues quickly and make necessary adjustments.

Get the Financial Support Your Mission Deserves

The accounting shortage affecting nonprofits won’t resolve itself quickly. The demographic trends and pipeline issues run too deep for fast fixes. Organizations that wait for the talent market to improve will likely wait a long time. Meanwhile, financial operations need to function well regardless of external conditions.

We understand the unique challenges nonprofits face because we’ve worked exclusively with organizations like yours for nearly 60 years. Our team includes CPAs who specialize in nonprofit accounting, from fund accounting and grant compliance to strategic financial planning. We offer flexible solutions tailored to your specific needs, whether you need help with particular functions or comprehensive financial management. 

Contact a James Moore professional to discuss how we can support your organization’s financial operations.

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