The evolving role of outsourcing within nonprofit organizations

Nov 05, 2018

Key takeaways

Finance and accounting outsourcing has also been proven to lead to benefits in the external audit process.

Finance accounting and IT are key outsourcing areas where nonprofit organizations can realize immediate and considerable benefits.

Outsourcing can provide more consistency, efficiency, and security for critical functions, at a predictable monthly spend.

Managed services Financial consulting Nonprofit

Many nonprofit organizations already understand the benefits that outsourcing can offer, with various third parties managing key business functions. In fact, nonprofits have been quick to recognize the challenges to hire and retain the necessary caliber of resources, leveraging some version of outsourcing to offset these concerns. However, adjusting existing strategies or expanding outsourcing programs can streamline service delivery and further increase efficiency and productivity.

Organizations define outsourcing in many different ways, and many nonprofits don’t frequently revisit their outsourcing programs. In addition, many have cobbled together an outsourcing plan with several disparate providers, resulting in a lack of efficiency. These organizations might not be getting the most value from their investments, ultimately missing opportunities for enhanced automation, functionality, innovation and security posture. 

More specifically, finance and accounting and IT are key outsourcing areas where nonprofit organizations can realize immediate and considerable benefits.

Finance and accounting outsourcing

With finance and accounting outsourcing, instead of bringing in potentially disjointed resources on an irregular basis, an experienced third party becomes an organization’s finance department. That outsourcing partner can manage and implement a more focused process related to transaction processing, month-end close and financial reporting.

A provider will typically integrate proven technology solutions to automate transactional processes, increasing efficiency and allowing internal personnel to focus on more strategic initiatives. Finance and accounting outsourcing has also been proven to lead to benefits in the external audit process, making the procedure more streamlined, increasing efficiency and potentially reducing fees.

IT outsourcing

IT outsourcing can provide a wide range of services, depending on an organization’s specific needs and depth of internal resources. It is a flexible continuum of services, ranging from functional support for critical business software to virtual chief information officer (CIO) services to help see around technology corners and to offer fractional IT resources in security, analytics and digital marketing on an as-needed basis.

A managed services relationship is the most proactive and strategic IT outsourcing option, with an organization turning over a significant amount of IT responsibilities to a third-party provider. In a recent RSM survey of CFOs, 69 percent of respondents believe an outsourced provider could do a better job managing IT than their internal IT team.

Next generation outsourcing

With outsourcing’s growth, simplifying vendor relationships can also add greater efficiency and insight. In the past, nonprofits had to manage multiple outsourcing relationships for IT, financial systems and other key business functions. But “next generation” outsourcing providers can bring various facets under one roof and help successfully navigate digital and financial transformation initiatives. Visibility across multiple business functions can help connect financial and technology systems, creating a platform to more effectively manage and measure outcomes.   

While some nonprofits are truly forward thinking and have implemented proactive outsourcing strategies, many still find themselves in break/fix scenarios, reacting to pain points in their people, processes and technology. These challenges typically originate from the current labor shortage and difficulty attracting experienced resources, or more localized issues such as inconsistent reporting or security breaches.  

Outsourcing can provide more consistency, efficiency and security for critical functions, at a predictable monthly spend rather than large, unplanned capital expenses. Unfortunately, nonprofit organizations have generally been underserved for so long, many do not realize how to get more from their potentially outdated outsourcing strategies.

Ideally, organizations can start to develop a more effective, comprehensive outsourcing framework by understanding their current strategies and where gaps may exist. A trusted, experienced advisor can perform an assessment, analyzing existing processes and opportunities, and helping the nonprofit understand how to leverage outsourcing more effectively, and evaluate whether the organization is receiving the appropriate value for the fees charged. In addition, benchmarking exercises with peer groups can also help an organization discern where outsourcing can provide additional value.      

Outsourcing has evolved to become a key differentiator for successful nonprofits. Instead of waiting for financial or IT issues to disrupt operations, modern nonprofits are working with providers to design proactive, scalable outsourcing relationships. These strategies can reduce the complexity of your manual processes, increasing the stability and performance of your technology investments, and enable more strategic and informed planning. 

RSM contributors

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