Financial Outsourcing

Financial outsourcing for charities and not-for-profit organisations

At AccountsPro we frequently speak with charity CEOs and Executive Directors who have already outsourced some of their day-to-day duties like graphic design, website development, marketing, and PR in order to maximize impact while delivering cost efficiencies.

A significant number of these leaders are also looking to explore the possibility of outsourcing their finance function. Often this question comes at the cusp when an organisation is carrying out a wider review of the efficiency and effectiveness of their support functions.

What’s driving this interest is largely to do with improvements in technology and the requirements of many charities to focus their resources on their frontline services and generally do ‘more for less’. There is also an increase in confidence and acceptance of remote working, which has, to some extent, quelled some of the scepticism around whether financial outsourcing can be a viable alternative to an in-house team.

Financial outsourcing delivers numerous cost efficiencies, and also to allow for better and faster access to finance data for day-to-day decision making by leadership teams and trustees. Some of the most commonly outsourced functions include bookkeeping, management accounts, payroll, Charity Commission reporting, grant reporting, and board reports.

In this article, we will explore the benefits of financial outsourcing in the charity sector. We will also provide guidance on when outsourcing should not be considered.

 

What are the benefits of financial outsourcing for charities and not-for-profit organisations?

Outsourcing, offers organisations the opportunity to ‘buy’ only the resources they need. This is particularly attractive for example in regard to payroll services, where organisations may have only a single employee who is able to run the monthly payroll. In most cases, outsourcing will reduce an organisation’s overhead costs. This is because multiple functions such as payroll can be run at a fraction of the cost of hiring a permanent onsite team.

If we come back to our example of the employee who is responsible for running the monthly payroll. If there is no one else that can perform the function when he becomes ill, then this will reduce the continuity of service. This also leaves the organisation to be exposed to unnecessary risks and threats as a result of tasks such as payroll and other financial functions not being performed in a timely manner. By outsourcing these services, the contracting company can mitigate these risks and enable complete continuity of service.

In recent years the charity sector has seen a backlash for the lack of transparency, particularly when it comes to submitting annual audits and accounts. With charity pressures growing, CEOs and trustees are turning to outsourcing as a way to improve the quality and reliability of their accounts. From our own experiences, having a fresh pair of eyes that is looking at the organisation from the outside is both hugely valuable and beneficial. This is especially true for firms that are looking to increase their transparency and accountability to donors and service users of the charity.

Another interesting benefit that comes out from financial outsourcing, is that you will often have a outsource team that have a much broader range of specialist knowledge, experiences and skill sets which can be utilised when needed. For example, when one of our clients needed a specialist who was familiar with the South African tax system. The support they needed was provided by a team member they already worked with, in a related but different capacity.

Outsourcing also helps charities to better utilise their internal staff and increase targeted efforts. By contracting out tasks such as bookkeeping and other financial administration, charities can free up the time of internal staff. This allows them to focus on work that better meets the aims and objectives of the organisation and in turn can work to increase in levels of staff retention. When staff are hampered with tasks, particularly finance tasks which are not core to their role, this is often a reason why someone will start to look elsewhere for an opportunity that is more fulfilling to the core of what they do.

Technology advancements have made outsourcing a more efficient process, allowing secure uploading of documents and data to a secure portal. We have also seen advancements in Optical Character Recognition software that converts invoices into accounting data; and dynamic management reporting that can be structured to the requirements of CEO, senior management and trustees. Both accessibility and portability to data is no longer a stumbling block to financial outsourcing as it once was.

 

When Outsourcing Should Not Be Considered

It should be noted that financial outsourcing is not a one-size-fits-all solution, and it is not necessarily the most effective option for every organisation. The pros and cons of outsourcing should be weighed up by charities, and they must also ensure that outsourcing aligns with their core mission and values. It is also imperative that the charity chooses an outsourcing partner that is reputable and reliable. This will ensure that the charity’s financial management is in the most capable of hands.

When it comes to outsourcing, charities should be aware that if it is not managed properly, it can lead to a loss of control over the process. In this regard, it is essential to set up an effective procedure for outsourcing management from the onset of a contract. This will ensure that control over the contract is maintained.

Charities should also consider the importance of maintaining strong relationships with their donors and stakeholders. If outsourcing may have an impact on these relationships, charities should think twice before proceeding. Finally, outsourcing should not be used as a way to avoid dealing with internal issues. Organisations should address internal problems and create a culture of accountability before considering outsourcing as a solution.

 

Conclusion

Overall, outsourcing can offer many benefits to charities, including cost savings, access to specialist skills, better risk management, and improved transparency and accountability. With the right approach, outsourcing can help charities achieve their mission more efficiently and effectively which enables them to provide better services to their beneficiaries.

We would be more than happy to provide you with further information in relation to our financial outsourcing services for charities, so please feel free to get in touch with us at: hello@accountspro.co.uk or via our contact page:- https://accountspro.co.uk/contact-us/

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