Outsourcing the Accounting Function in NPOs
Posted on 22 June, 2020 at 13:57
By Kudakwashe Ngoma.
One of the key takeaways from the Covid19 pandemic to the leadership and management of NPOs may be how critical it is for organisations to be running on a leaner structures and budgets. The pandemic ensured that majority of programmes and operations for organisations are put a halt or much delayed as staff observed the lockdowns and stayed at home. This, however, did not relieve the organisation of its responsibility to pay out salaries to its staff, as they desperately needed the financial support during a very difficult time. Organisations with lean structures had lighter burdens to carry, but of course the same cannot be said of their counterparts with more broad structures. The question as to how an organisation can be fully constituted and equipped with capable personnel, but at the same time maintain a lean structure can be answered by one relatively easy solution, Outsourcing.
Outsourcing is not a new concept. For many years, organisations have transferred services such as bookkeeping, accounting, and Controller services to third-party firms. While once seen as an option for larger institutions like multilaterals in the past, today the floodgates of outsourcing have opened and more and more organisations, young and large, are reaping the benefits. Let’s use ABC Foundation as a scenario organisation to clearly elaborate on how outsourcing would help organisations attain a more sustainable position during a crisis and going forward. ABC Foundation has outsourced its accounting function to KFM Consultants, and we are going to look at some of the benefits that it has derived, and how this has enhanced not only its ability to weather the Covid19 storm, but also overall sustainability.
Save Money and Reduce Overhead - Organisations typically spend 2 to 5 percent of revenues to properly train and staff internal accounting departments. While it might not seem like a lot, outsourcing your accounting can actually lower your total costs by eliminating expenses related to employee benefits, training, accounting software, hardware, and office supplies. By outsourcing, there is no need to buy extra hardware and software for your accounting needs. A provider of service will have access to leading accounting software and will have the experience and know-how to properly use it to help your business. You will also save money from the potentially negative consequences of a financial mistake. Mishaps like this can cost you a lot more than the cost of bringing in an outsourced provider to do the job right.
Save Time and Improve Operational Efficiency - By spending less of their day overseeing bills and payroll, ABC Foundation freed up valuable time that they redirected back into managing and growing their programmes and operations. Time is the most valuable resource we all have. Putting their accounting in the hand of professionals that the can trust, meant they could focus on what they do best, serving humanity. The Executive Director of this hypothetical organisation who has expertise to focus on organisational mission and goals, that is, to better the livelihoods of disadvantaged children, would concentrate on the growth and managing of their day-today operations.
Be Proactive and Scale - When you outsource your accounting you can expect to minimize large investments in human resources, technology, and infrastructure and maximize your core programmes, thereby giving an opportunity to scale and react to change more quickly. For example, outsourcing gives an organization the ability to more efficiently handle the surges in activity that may be seasonal or based on program lifecycles. Rather than having internal resources that are too busy at times and with nothing to do at other times, organisations can instead hand those concerns over to the outsourcing provider, and only get charged for actual work done. For ABC Foundation, their outsourcing of the accounting function meant that they needed not pay monthly fees for services whilst they were closed due to the Covid19 crisis.
Reduce Risk - In countless incidents, it has been recorded how organisations have had money stolen from them by trusted employees. It can be hard to enforce a strong checks and balances system without making honest employees feel distrusted, which reduces company morale. Thankfully, outsourced accounting offers the perfect solution. When you hire an outsourced accounting service provider, you not only save money, time, and stress by having experts handle your financial reporting, you also have a third party to audit your money trail. You’ll decrease your risk of internal fraud by having an impartial standard of checks and balances, which will also help improve compliance.
The above benefits do in no way exploit all the benefits of outsourcing an accounting function, but are jus a few highlights of how the service could transform your organisation and position you for better sustainability. The technological advances in the accounting industry, such as cloud technology, have allowed services such as outsourcing be within reach for most and all the more useful. Contact us at KFM Consultants and get your tailored solutions for your organisations.