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Think Outsourcing!

financial management Dec 18, 2020

By:  Kathleen M Clayton, CPA

Really need a CFO but can’t afford one?  Outsourcing might be the answer for your organization. 

Outsourced accounting professionals help direct the financial processes that would typically be done by your or your own employees. The services can vary in scope, from completely taking over the accounting department and its day-to-day functions to supplementing a current need or creating a virtual accounting department.

Let’s take a quick test….

  • Do you spend countless hours making sense of spreadsheets and receipts?
  • Are financial errors costing your organization?
  • Is there high staff turnover?
  • Do you have one or more vacant accounting positions?
  • Is there a lack of timely or insightful reporting?
  • Is a process using too much of management’s time?
  • Are the technology demands high?
  • Is the function NOT core to your service operations or your mission?
  • Have you had rapid growth or is there a special project for which you need help?
  • Do you need technical financial expertise that you just don’t have inhouse?
  • Is your staff so small where everyone is wearing multiple hats and there is a risk of fraud or theft?

If you answered yes to any of these, outsourcing may be an ideal solution for your organization.

So, what does “outsourcing” mean?  The answer is, it depends on how much help you really need, in what areas, for how long a timeframe and for how large an organization.  The very basic outsourcing arrangement can be simple and just involve:

  • Processing accounts receivable
  • Processing accounts payable
  • Reconciling credit card transactions
  • Reconciling bank accounts
  • Creating basic monthly financial reports

A more sophisticated need may include:

  • Budgeting, forecasting
  • Cash flow analysis
  • Strategic planning
  • Software conversion and implementation
  • Transitional accounting department leadership
  • Accounting department assessments
  • Audit readiness and workpaper preparation
  • Board and committee support

But the biggest question is do you need these staff on a full-time basis, maybe not.  Which makes outsourcing options appealing to many organizations.

What is the process to hire an outsourcing partner?

First, identify what your needs are. Be specific and realistic about what tasks and processes you expect the partner to perform.  Do you expect onsite service, or is virtual servicing acceptable?  Will they attend meetings, how many, how often, in person or virtually?

Research your options.  Google searching is great; but may not be the most effective way to find an outsourcing partner.  Professional societies, chambers of commerce and other business networking groups might be a place to start.  Consider if your partner needs to be local or not. 

Request a proposal and price quote from selected vendors.  This will likely include some exchange of information such as number of transactions to be processed, technology to be used, reporting and meeting expectations.

Once you receive the different proposals from the various vendors, it is important that all the requests are analyzed carefully. Be sure to check references, their linked in profile and online reviews.  The exact nature of the service that will be provided for that price also needs to be examined thoroughly. Each of the requirements being addressed need to be weighed according to their importance and the price quoted should be checked. If possible, meet the team.  Personalities matter and I always want to work with people that are compatible with me.

The best proposal which suits your requirements and comes at a reasonable cost should then be selected.  Remember, the lowest bid may not be the best solution.  Once hired, the vendor will submit a contract with agreed upon tasks and responsibilities as well as payment arrangements.  Read the fine print, ask questions and understand exactly what you are signing on for.  Some common obstacles include added technology costs, revolving staff members on the team and time lags for responses.  Beware of contracts with really long time frames that don’t have exit clauses. 

Both parties will invest significant efforts in building a productive outsourcing relationship.  The best relationship should include open and continuous dialogue between the outsourcing partner and the user.  COMMUNICATE, COMMUNICATE, COMMUNICATE. 

Your outsourcing partner should make your life easier and your organization stronger.

Kathleen has over 36 years of experience in providing auditing, accounting, tax and consulting services to privately held businesses and not-for-profit organizations. She specializes in preparing tax exempt status applications, consulting on charitable regulations and providing outsourced management and accounting services to numerous organizations. She routinely consults with organizations that receive federal and state funding. Kathleen holds a BBS in Accountancy and Management and an MBA in Business Administration. She is a member of the New Jersey Society of Certified Public Accountants (NJSCPA), the American Institute of Certified Public Accountants (AICPA), and the AICPA Not-for-Profit Section.

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