Outsourced bookkeeping for a nonprofit

by | May 11, 2023

Bookkeeping is a critical component of running a successful nonprofit organization. It involves the management of financial transactions and the maintenance of accurate records to ensure that your organization remains financially healthy and compliant with the law. However, managing bookkeeping in-house can be time-consuming and expensive, which is why many nonprofits are turning to outsourced bookkeeping services. 

A study by the Stanford Social Innovation Review found that nonprofits that invested in strong financial management practices, including bookkeeping, were more likely to achieve their mission and grow their organization. Strong financial management can come in many forms and there is no one size fits all for any nonprofit organization. As a leader, you’ll have to determine what is right for your nonprofit. In this article we’ll help you get started by exploring the benefits, risks and other considerations regarding outsourced bookkeeping for nonprofits. 

Benefits of Outsourced Bookkeeping for Nonprofits

Cost Savings

Outsourced bookkeeping has the potential to offer significant cost savings, depending on the complexity of your organization and your needs. When utilizing outsourced accounting services, you only pay for the services you need and you may have access to more premium software than you could purchase on your in-house budget.

Labor Costs

You will have the ability to obtain services when you need them without worrying about flexibility, vacation days, or geographical location. You can source the best services for your needs, exactly when you need them.

Expertise and Experience

Industry specific specialists can help your nonprofit organization minimize risk by providing professional tailored advice. As regulations surrounding nonprofits can be incredibly complex, expert guidance on financial matters, including compliance with tax laws and regulations, is key. This can be especially helpful if you don’t have a dedicated staff-person with the expertise level required. A few common areas where in-house staff may not be able to handle growing complexities are:

  • Audit experience – if your nonprofit is audited by the IRS, an outsourced bookkeeping service can support you in this process
  • Complex tax preparations – while nonprofits are tax-exempt, they are still required to file their Form 990, which in some cases can be incredibly confusing and complex
  • Key dependencies – if someone is out of the office, or unexpectedly leaves your organization, it may be difficult to backfill this position or understand all of the organizational knowledge they held


While your in-house staff may be able to handle the day-to-day, as requirements increase and your organization grows, an outsourced service can support and grow with you, while also adding additional services that may not have been necessary before. Outsourced accounting services for nonprofits can handle a whole spectrum of accounting tasks for your organization:

  • Processing payables, receivables, and cash transactions
  • Reconciling accounts at month-end
  • Preparing financial statements, budgets and forecasts
  • Assisting with tax and grant-reporting requirements
  • Adequately communicating financial matters to your board
  • Accurately submitting state and federal filings

Time to Focus on Mission

Outsourcing your accounting could free up time for personnel to focus on the mission rather than keeping up with ever-changing accounting requirements, filings, and reporting. These requirements are typically too large for just one person to handle, thus making this endeavor more of a team effort. If there are many people stretching themselves to get this done, you might not only be utilizing their time inefficiently, in an area where they lack expertise, but you may also be taking away from their mission-critical efforts. Outsourced bookkeeping can provide peace of mind knowing experts are on top of the accounting so your staff can focus on what matters most.

Access to Premium Accounting Software

Accounting software comes in many shapes and sizes, but many times the software organizations start with is not tailored and cannot grow with them. As your organization grows, access to the appropriate software can become a large unforeseen expense. Using the scalability mentioned above, outsourced accounting services typically have access to these softwares to ensure that your accounting, reporting and filing is done accurately and efficiently. 

Risk of Outsourcing Nonprofit Accounting

While there are many benefits to outsourcing your bookkeeping, we would be remiss not to mention the potential downsides. Many organizations are close to the heart of their leadership, and letting go can be difficult. There are some potential downsides to outsourcing and it will be up to you to determine whether the benefits outweigh these for your organization. 

Loss of Control

Entrusting the financial management of your organization to an external party can feel difficult and like you are losing control of a key component that makes your organization run smoothly. Ensuring that your bookkeepers are transparent, experts and trustworthy can help ease this fear. Properly evaluate each company and their credentials before letting go of your financial data. 

Timeliness and Accessibility

Access is another common fear. Not having up to the minute transparency into your finances can be daunting. Make sure that you find a partner in your service provider and ensure that your access and communication channels are clearly defined. You may also choose to outsource certain aspects of your accounting that may require less immediate access.

Security Concerns

The financial data of an organization is incredibly sensitive. Ensure that your provider has proper security measures in place and ask to see these in action before proceeding.

Communication Challenges

As part of your diligence in selecting the right provider, you’ll need to consider what your communication preferences are, for both you and your staff. A bookkeeping or accounting service that is right for you will be able to accommodate your needs.


Transitioning from in-house to outsourced accounting services can be complex and time-consuming. You’ll need to have a solid plan outlining:

  • How financial data will flow
  • What are the communication channels and expectations
  • What software will be used and who will have access
  • Who will train the provider on your accounting processes and procedure
  • How quickly can they respond in a crisis
  • How long will this transition take

Compliance Requirements in Nonprofit Bookkeeping

Ultimately, you will need to evaluate the pros and cons of an outsourced nonprofit accounting service. By weighing the benefits you can take a look at where your organization might gain efficiencies and expertise while evaluating the best course of action. Remember, nonprofit accounting comes with a slew of special regulations, standards, and reporting requirements. There is no one size fits all solution. When determining your needs, be sure to consider what your complete financial package looks like and where you might need some help. Keep in mind:

  • Nonprofit accounting standards
  • Donor tracking 
  • Fund Accounting
  • IRS Regulations
  • GAAP Standards
  • State-specific requirements
  • Tax Filing
  • Grant Requirements 

By considering outsourced bookkeeping for your nonprofit, you can be on your way to more accurate reporting, more satisfied and less burnt-out employees, and, most importantly, more time to do the organizational work that really makes an impact on your mission. 

If you’ve decided the outsourced bookkeeping is right for your organization, get in contact with us and see how Charity CFO can help!


Do You Struggle to Make Sense of Your Financial Statements?

Get our FREE GUIDE to nonprofit financial reports, featuring illustrations, annotations, and insights to help you better understand your organization's finances.

Get the free guide!


Leave a Reply

%d bloggers like this: