Technology, Outsourcing, and Nonprofit Accounting

by Michael F. Cade, CPA, CGMA | Apr 23, 2019

NonProf_250x383Sweeping changes in cloud-based technologies, significant decreases in electronic storage costs, and increases in connectivity speeds have combined to provide affordable and accessible online resources for even smaller nonprofits. These changes reach far beyond finance; they can greatly improve data sharing, add high-order data security, and streamline processes.

There has also been an associated rise in specialized outsourced services. This can take the form of narrow task outsourcing, such as employee benefits enrollment, or broad functional outsourcing, up to and including full general ledger accounting.


Tech Trends

Cost-effective cloud-based ERP – Enterprise-level systems once reserved for large companies have been swept up in the software-as-a-service (SaaS) wave, and now “big” solutions are being offered to small and midsized organizations at a cost-effective rate. There are also resellers that apportion the up-front investment costs associated with enterprise resource planning (ERP) systems across their client base. Both solutions allow nonprofits access to comprehensive and integrated business systems on a per-user charge model. Some providers even offer significant discounts for nonprofits.

Apps explosion – If your organization leans toward function-specific systems instead of broad enterprise-type systems, there are strong trends here as well. Nonprofits can take advantage of an ever-growing list of applications built exclusively for the sector, such as donor tracking and grant management. Apps are available for general business functions too, including payroll and benefits processing. Expect to see more programs available for nearly every segment in the nonprofit sector.

On-demand microtraining – The current trend in online training is toward shorter, highly specialized courses that are made available quickly. Need an update on the latest not-for-profit FASB disclosure guidance? You won’t have to wait for your audit firm to roll out a webinar. Microlearning will drive learning down from broad topics to specific operational advice.

New service delivery channels – Nonprofits that provide service in person or in small groups are starting to incorporate online options, either live or on-demand. This model is already in place in educational organizations, but trends point to expansion into new areas, such as counseling, workforce development, and other social support services. Nonprofit CPAs need to understand the ramifications of this evolution to help organizations diversify and protect funding.

Dashboards – Access to better systems invariably leads to an expectation of bigger, better, faster reporting. That means nonprofit CPAs must address the technology trend of dashboards. Everybody wants them, but near instant access to data comes with many pitfalls because big data does not automatically show good information. Dashboards need to be designed thoughtfully, and must be monitored and maintained to ensure that the interpretation of the data provides accurate and useful information.


Outsourcing Trends

General ledger accounting and reporting – Outsourced accounting function services have been available for years, but many of those service options have expanded. Fueled by the growth in SaaS platforms, firms are offering service in nearly every type of accounting transaction. This is a huge step for transaction-heavy organizations: for those relying on a few specialized resources, outsourcing may be a viable option. When considering this, think about succession, segregation of duties, coverage for time off, and whether or not you believe internal training and employee development programs are keeping your staff current on accounting changes impacting your organization.

Cash flow accelerators – If an organization is not ready to fully outsource its accounting functions, plenty of smaller scope services are available. Two that have been available for some time are lockbox processing for receipts and automated accounts payable processing. Both work by receiving documents directly from vendors and funders. The lockbox services streamline and accelerate cash receipt and application with accounts payable services to receive, scan, and obtain approvals for invoices and process payments. Together the services provide surge capacity and provide useful data to support cash flow forecasting and cash velocity metrics.

More outside human resources – Providers of outsourced services (payroll, etc.) and a host of new companies are expanding into other areas within human resources (HR). From applicant tracking and employee benefit enrollment, to performance management and regulatory compliance monitoring, these service providers are looking to transform transactional HR work and free up resources. Outsourced HR providers have significantly more buying power than most nonprofits, and can drive cost savings while providing valuable information on best practices and trends.

Grant management – Many nonprofits are challenged by grant compliance and reporting requirements. These often-complicated tasks require program and administrative resources, taking both of these resources away from other areas. Services are now available that will determine the compliance and reporting requirements from your grant agreements. They can interface with systems that hold the data, build reporting, and provide feedback on potential compliance concerns. As with other outsourced services, nonprofits can benefit from reduced administrative burden and can receive valuable objective feedback on grant delivery processes.

Driving Culture and Mind-set Changes

CPAs in nonprofit organizations are going to be called on to explore and recommend the right mix of outsourced and technology-supported activities. There is a huge potential for savings and efficiencies available. Nonprofit CPAs need to know how to assess, decide, and convince others of the value associated with these options.

Optimize staffing – Nonprofits tend to balk at outsourcing due to the fact that the change may make employees redundant. CPAs need to plan for this and determine how to optimize staff contributions. Moving staff from transaction processing to analysis or adviser roles can benefit the organization without reducing staff. For example, freeing up staff from transactional roles and assigning them to help operational staff to better understand their costs can improve program efficiency. Also, consider adding tech and outsourcing to succession planning. If a staff member wants to move to another position or leaves the organization, take that opportunity to consider new tech and outsourcing alternatives.

Data protection – Outsourcing and cloud-based technologies require volume data transfers and significant access into company systems. Organizations with legacy systems will have data protection policies that will not permit these types of solutions, so CPAs will need to work with IT to modify policies to meet the new needs and maintain the proper data protections.

Cloud and outsourcing options change the focus of data protection from building internal capabilities to monitoring others’ capabilities. This may be a new situation for your organization’s IT resources, so plan ahead and identify the new skills needed to effectively oversee the tech or outsourced solutions.

Data educating – Everyone talks about “big data,” but few understand its benefits and challenges. Big data is not automatically useful information. It must be transformed from huge streams of facts and figures into clear and concise information that supports decision-making. Nonprofit CPAs will need to be data educators to help nonfinance people interpret information correctly.

Staff vs. vendor management – Outsourcing and SaaS agreements will change the role of the nonprofit CPA from staff manager to vendor manager. This is a huge shift: the CPA will be responsible for evaluating the service provided, not the staff member doing the work. Services are governed by agreements, so nonprofit CPAs will need to be versed in contract management and how to effectively deal with service issues.

Using outsourced services means that CPAs are responsible for systems and processes managed by others. When it comes time for audit, focus will no longer be centered on the company’s internal controls and processes; it will be a mix of both the company and the service provider. The nonprofit CPA needs to be able to assess its vendor. Thankfully, these providers are audited, and the result of those audits are the SOC 1 and SOC 2 reports. These reports will be critical to the nonprofit CPA, so the CPA must learn how to interpret and use the reports in their vendor management process.


Bottom Line

Technological advancements and game-changing service capabilities provide nonprofit CPAs with new options to improve the efficiency and output value of account and finance functions. These tech trends will allow smaller nonprofits to use better systems more effectively, while outsourcing trends will give all nonprofits options to get high-quality services at cost-conscious price points. Together these trends will help push nonprofit accountants from transaction processors to high value analysis and advisory roles, and they will provide better information for critical decision-making. Strengthen your nonprofit by watching these trends and adding tech and outsourcing solutions to your accounting toolkit.  

Michael F. Cade, CPA, CGMA, is a nonprofit leadership adviser and executive coach for MFCCoach LLC in Morrisville and a member of the Pennsylvania CPA Journal Editorial Board. He can be reached at and on Twitter @mfccoach.

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