Nonprofit directors and boards oversee a large and diverse range of Canadian organizations, including some 26,000 in BC alone. Together, these organizations generate $80 billion in annual revenues and provide 2 million full-time jobs. As an executive director, your main duty is to carry out the mission of your organization. But that also means overseeing the budgeting, fundraising, and other accounting tasks.
Managing, organizing, and understanding your nonprofit’s finances plays a key role in its effective administration - not only in terms of monitoring your organization’s financial health but in guiding its future direction.
At the same time, however, attempting to navigate the wide range of accounting tasks faced by nonprofits without specialized assistance can result in squandered resources, more risk, and oversights in both accountability and financial decisions. If you’re struggling to juggle your nonprofit’s bookkeeping requirements, here are 4 great reasons why you should consider outsourcing these duties to a professional service.
1. Free Up Valuable Resources
By hiring a professional service to streamline and manage your bookkeeping processes, you can free up time and money for your organization. With a mission-driven bottom line, nonprofit organizations need to create an annual budget, while also meeting specialized tracking and reporting requirements for things like:
- expenses related to program services, fundraising, and management activities,
- sales tax, and
- income sourced from grants, donations, and sponsorships
Too many directors find themselves working with limited funds and personnel, or take a scattered approach to their daily bookkeeping responsibilities. This inevitably leads to accounting delays and poor record management that can make it difficult to substantiate revenues and expenditures.
Outsourcing your bookkeeping effectively liberates valuable organization resources. Nonprofit accounting professionals not only have the knowledge and expertise necessary to track your organization’s income and expenses by program, they also have the ability to:
- Optimize your bookkeeping processes to ensure they’re efficient and consistent,
- reconcile your bank accounts,
- provide accurate custom monthly reports to help you monitor your financial activities and,
- help your board make better decisions for the organization
All of which allows you to devote more effort to achieve your mission.
2. Offset Risk
Working with a nonprofit bookkeeping expert gives you the opportunity to examine your organization’s accounting processes and controls for potential problem areas. Reporting revenue, donations, and other income can be complex, given certain nonprofit specific restrictions. But working with the right accounting service eliminates the need to hire an in-house team, and mitigates the risk associated with staff fluctuations.
Outsourcing also allows you to take full advantage of a host of digital tools and application partners that reduce data entry and processing errors by automating many bookkeeping duties. In fact, working with a service that leverages modern, cloud-based practices lets you store and retrieve your financial data from anywhere while providing you with a higher level of data security.
3. Stay Accountable
Keeping your nonprofit accountable to the public, the board committee, and to the Canada Revenue Agency takes a lot of monetary management. Not to mention the fact that every executive director has a responsibility to understand not only their organization’s financial health but its implications in terms of decisions made and actions taken.
Some of the biggest bookkeeping challenges faced by senior nonprofit management include:
- the need to track all revenue sources, and consistently prove they’re being used exclusively to fulfil the company’s mission,
- taking steps to ensure funds are being spent in accordance with a donor’s or funder’s conditions,
- fulfilling certain statutory obligations, like remitting payroll deductions to the CRA, and
- implementing internal controls that prevent fraudulent transactions within the organization
Does your company claim charitable status? If so, you’re probably under even greater pressure to keep your nonprofit accountable to strict CRA regulations that dictate the level of accounting diligence that must be maintained.
Fortunately, nonprofit bookkeeping professionals understand all the accounting standards that apply to your organization. They’re also well-versed in the financial reporting regulations your organization needs to comply with, and the various types of financial statements that must be generated on a regular basis.
4. Make Better Decisions
Being able to communicate accurate financial information to your board members will enable them to use the financial insights for budgeting and other decision-making processes. By making custom financial reports available at the end of every month, a bookkeeping or accounting service with proven nonprofit experience can:
- help your team gain visibility into current revenue and expenses,
- assist your board in the budgeting process,
- provide you with clarity on which programs are the most financially viable, and
- effectively guide your committee with data that can be utilized to generate more funding
Outsourcing your nonprofit’s bookkeeping and other back office functions will put you in a better position to liaise with stakeholders, initiate new partnerships, and engage in fundraising activities. You’ll also empower your nonprofit organization with financial insights that will ultimately drive greater impact.
At Enkel, we specialize in bookkeeping, payroll and more back office services for nonprofit organizations. Whether your organization is located in Vancouver, Edmonton, Calgary, or Toronto, we've got your bookkeeping needs covered! Contact us today to learn more.