A Guide to Outsourcing Nonprofit Fiscal Management

Introduction 3

The Importance of Good Fiscal Management 4

The Role of Technology 5

Financial Outsourcing Services: 3 Levels of Support 6

Strategic Fiscal Management Tasks 8

Fiscal Management Technology Products 9

Bill Payment and Invoicing 10

Employee Expense Tracking and Reconciliation 12

Accounting Software 13

How Financial Management Outsourcing Can Benefit You 14

FMA: The Right Partner 15

Table of Contents

The emergence or accelerated acceptance of new technologies can dramatically change the way we think about the institutions that adopt them. In their book, The Networked Nonprofit, Beth Kanter and Allison H. Fine chronicled one such shift by looking at how users of emerging social media platforms advocated for causes they passionately supported. Kanter and Fine tried to determine how an organization might put these individuals to work in focused ways, sharing the mission of the organization. The authors discovered that successful cause-focused organizations shifted the emphasis of their marketing efforts from execution to orchestration, allowing the staff to think more strategically. This made it possible to plan communication efforts over a longer period of time while also staying true to the organization’s long-term priorities.

Here was a paradigm shift in the making. This was a new way of thinking about what occurred “inside” and “outside” of the organization, and it made many people uneasy. What about controlling the message? Could outsiders, or non-employees, be trusted to tell the right story? Was it risky to put crucial messaging power in the hands of strangers, regardless of their benevolent intentions? As it turns out, the stakes were not as high as originally anticipated. Social media became increasingly acceptable and widely used in the nonprofit sector, and organizations made this engagement a routine part of their operations.

Nevertheless, the social turn in marketing was only among the later changes to how nonprofit organizations think about their operations. While the initial anxiety was largely about risking the reputation of the organization, there was another concern. Although an organization may have previously relied on the capabilities of a marketing expert or communications professional, the new networked nonprofit developed its own marketing infrastructure—one with stability outside the walls of the organization. Over the years, these advocates persisted from one staff to the next.

There are other areas of an organization where specialists take on a particular function. From IT and payroll to facilities management, design and printing, there are numerous instances when it makes sense to trust the organization’s inner workings to outside professionals, especially when those individuals can provide more efficient processes that yield better results.

At the same time, people who work in the nonprofit sector are often warned about mission creep and the threat it poses. Although it may not always be easy to detect, it exists everywhere, including opportunities that may be peripheral to your expertise or ones that are just too good to pass up. But sometimes it’s simply a consequence of doing business. In fact, many aspects of running a nonprofit distracts leaders from focusing on the mission. For instance, when a leader is forced to become an expert on website hosting, the mission creeps a little.

Fortunately, some experts make it their mission to handle the things that distract you from your mission. That’s why it only makes sense to shift your focus from the inner workings of running the organization to orchestrating the work of these experts. That, of course, makes it possible to stay laser focused on the short- and long-term goals of your organization.

For many leaders, this approach takes a while to get used to. It’s important to first determine which operational aspects are distracting you from the mission. Then you can prevent mission creep by collaborating with experts in these areas. But it demands that you think differently about the boundaries of your organization. You must envision it as a healthy collaboration with trusted partners rather than a silo that duplicates the functions of the nonprofit next door, with none of the advantages of scale, modernization and efficiency, and the competitive drive to adopt best practices and explore new ones.

Introduction: Managing Your Boundaries to Stay Focused on Your Mission

3

The Importance of Good Fiscal Management

Every nonprofit organization needs consistent and reliable fiscal management to achieve its mission. At the most basic level, good fiscal management keeps an organization in compliance with the law and with funder or donor restrictions. But it should also be a source of strength and a resource for helping an organization reach its goals. In the hands of thoughtful leaders, accurate and timely financial information is an invaluable tool for strategic decision-making that establishes an organization’s resilience and contributes to its long-term sustainability.

So, what are the components of good fiscal management? Policies and procedures are the specific written guidelines—the rules—for how financial work at an organization gets done. They should align with industry best practices, and they must be thoughtfully tailored to an organization’s culture and context. Staff may come and go, but fiscal policies and procedures remain.

Consistent adherence to established policies and procedures yields high-quality, accurate, and timely data, enhanced by a commitment to technology that makes it visually digestible, portable and actionable. Good data enables leaders to make the critical strategic decisions that can make or break an organization.

To be successful, leaders must be able to count on good fiscal management. Those who do can immediately grasp and easily communicate the overall financial picture of an organization, allowing them to provide oversight and to steer it in the right direction.

And, in a world of limited financial resources, a nonprofit organization that understands the importance of strong fiscal management—and can demonstrate it—will stand out from the crowd.

The bottom line? Good fiscal management consists of thoughtful policies and procedures that yield good data, unlocked and visualized via appropriate technology as an aid to strategic decision-making. Leaders who insist on good fiscal management reap a variety of benefits for their organizations:

Achievement of the mission, goals and objectives

Demonstration of accountability to donors

Timely and strategic decision-making

4

The Role of Technology

It’s hard to overstate the importance of technology in nonprofit fiscal management. This is especially true since cost, the traditional barrier to entry for nonprofits, has never been lower. Modern technological solutions can replace older, more time- and labor-intensive processes, dramatically increase accuracy, safeguard sensitive information, provide workflow triggers and oversight opportunities, and—perhaps most important—improve access to data. More than anything else, great strategy depends on accessible, intelligible data.

As the leader of a nonprofit organization, your time is in high demand. Fortunately, the right technology can help streamline transactional and operational tasks that cloud your day and distract you from achieving bigger goals and objectives. Technology can automate manual processes, ensuring that your organization is more efficient and accurate, and it can reduce redundancy and the need to use paper. It can also enhance employee satisfaction and decrease the time it takes to get things done.

As you take a closer look at technology and the role it plays in your organization, keep the following benefits in mind:

Helps optimize fiscal management functions

Streamlines financial management tasks

Improves workflow efficiency

Improves visibility into the organization’s financial state

Generates higher-quality financial information and reports

Improves compliance

Reduces accounting and fiscal management costs

5

Fiscal Management Outsourcing Services: 3 Levels of Support

As the leader of a nonprofit organization, you may decide to temporarily or permanently outsource the fiscal management function. This offers several key benefits, from freeing your time to focus on strategic objectives to assuring compliance with guidelines. Additionally, it provides the added confidence that decisions will be based on accurate, timely and easy-to-interpret financial reporting.

We’ll discuss these benefits in greater detail later on, but for now, let’s take a deeper dive into the three levels of service you should be exploring: transactional, managerial and strategic financial.

Transactional Support

This service helps nonprofit organizations execute a variety of ongoing activities that are necessary for maintaining day-to-day operations. These include:

Vendor Payment ProcessingMonthly processing of cash disbursements.

Donation ProcessingMonthly processing of donations, earned revenues and other income according to donor restrictions.

Payroll and Employee Expense ReimbursementMonthly processing of payroll and other payroll-related expenses.

ReconciliationsMonthly reconciliation of various accounts and banking activity.

6

Managerial Support

Managerial activities and the monthly close function are critical for the ongoing success of any nonprofit entity. This is often accomplished with the help of a senior accounting consultant. He or she is prepared to support and oversee a range of managerial level activities, including:

Financial ReportingThe best-case scenario for financial reporting comes in the form of customized reporting formats that are based on your organization’s internal and external reporting needs. This dashboard reporting is tailored to the needs of your organization. Additionally, a financial reporting package should be produced on a monthly basis to provide timely information.

BudgetingA strong budget makes it possible to focus on strategic goals, establish spending limits and ensure sound decision-making practices. With this service, an annual budget package is presented to the board of directors, along with budgetary revisions based on actual results throughout the year.

Audit SupportYour external auditor will require certain audit schedules for the fiscal year-end. Drawing on our extensive public accounting experience, we have developed a comprehensive audit support package that facilitates the annual audit and ensures a timely and efficient process. Our audit support package is continually being developed during our work as your outsourced fiscal manager, ensuring that you are “audit ready” throughout the course of the year.

Strategic Financial Support

Executive directors wear many hats and are challenged to efficiently manage multiple duties on an ongoing basis. With that in mind, there may be instances when they, and other leaders, would benefit from additional counsel and expertise. For this reason, strategic-level services should include the following:

Strategic DirectionSupport to the executive team to look at the organization’s strategic direction based on past results.

Leadership CoachingCoaching support to the leader of the nonprofit, for a set number of hours per month, for training in fiscal management best practices and time for questions on an on-call basis.

Finance CommitteeWhen needed, the outsourced expert will attend board meetings to discuss the organization’s financial position.

7

Strategic Fiscal Management Tasks

Strategic fiscal management sets the terms by which each of these areas of responsibility is conducted and orients them to a big-picture story about the organization’s finances. This is a story that your leadership and fundraising staff, minimally, should be able to tell stakeholders. But, ideally, it is one that should be shared by all staff and board. And it should be easily absorbed by your funders and donors as well.

To achieve sustainability and remain fiscally resilient, an organization must have its transactional, managerial and strategic responsibilities covered. And this requires attending to the organization’s financial planning, monitoring and operations to ensure that everything works together. If a breakdown occurs in any area, it’s a sign that additional support is needed.

Selecting and implementing the right technology can streamline and optimize many fiscal management tasks, but keep in mind that poor quality input produces inferior output. Today’s technology products are powerful but must be guided by a clear fiscal management strategy in order to work together to bolster your nonprofit’s overall fiscal strength.

It can be tempting to treat fiscal management as a means to an end and neglect it as a tool in an organization’s overall strategy. But leaders do so at their peril. A thoughtful approach to the strategic level of fiscal management in your organization can, quite literally, pay dividends. A strategic approach implements best practices in the following areas:

Financial planning

Financial monitoring

Financial operations

Governance

8

Fiscal Management Technology Products

We’ve already talked about the role of technology and how it can help nonprofit organizations streamline the transactional and operational tasks that consume their time and distract from other, bigger-picture issues. The return on this investment in technology is easier to identify than ever before. It comes in the form of increased efficiency, greater accuracy, enhanced speed, and in some instances, job satisfaction.

Still, choosing the right software for your organization can seem like an overwhelming task. How do you know if one solution is better than another, and which one is best suited to your organization? Again, this is where outsourced consultants can help. As experts, they can share their experience with the various systems and help select one that addresses your needs. They will also assist with implementation and training, as well as the architectural framework of the system and how the chart of accounts should be set up to capture data that will provide quality information as an end result. Based on their experience using the system with other clients, they will help your team understand how to use the system to its fullest.

There are three types of cost-efficient fiscal management technology products to consider:

Bill payment and invoicing

Employee expense tracking and reimbursement

Fund accounting software

9

Bill Payment and Invoicing

On a monthly basis, every organization must deal with the realities of accounts payable and accounts receivable. It’s always in their best interest to simplify the process, and that begins with implementing the latest technology. Bill payment and invoicing services increase efficiency by automating the process and moving your finances to the cloud. In other words, you go from paper-based to digital.

This in turn provides a snapshot of your cash flow at any point in time, eliminates paperwork, saves time, and cuts back on the costs associated with managing cash flow, accounts payables and receivables. An automated bill payment process can save time and improve accuracy.

Good online bill payment software is measured by its ability to:

Automate invoice approval Allows you to pay invoices from wherever you are, including from your mobile phone.

Automate the invoicing and donation collection processMaking it possible for individuals to donate online.

Simplify the deposit processEnsuring that the money is deposited and updated in your ac-counting software upon arrival.

Automated bill payment and invoicing makes it possible to enter the information into the system on a timely basis, and it allows for up-to-date financial reporting. If the system is updated 24/7, the tools can be accessed at any time, from anywhere. This allows for real-time access to data.

10

Creates digital resourcesManual tasks require numerous hours to complete. Automated bill payment and invoicing simplify the process, improve accuracy and increase timeliness. Also, once everything is paperless, it’s easy to store the information online without the task of filing. Invoices, check images and other documents are now accessible from anywhere.

Reduces paperworkMoving to a paperless portal eliminates the need for storage and for mailing documents. This saves money and decreases the time it takes to receive, identify and retrieve items. Vendors can now submit documents electronically. Data can electronically be entered into a system, and the need to print and mail checks is eliminated.

Optimizes cash flow managementMost organizations know the importance of cash flow management. When the process is automated, it is easier to schedule when bills are paid, which in turn provides greater control over cash flow. Automating the collection process will allow customers to pay via electronic formats, and the invoicing function can be streamlined with electronic invoicing and collection features. This, too, provides greater control over cash flow.

Protects against fraudFinancial fraud is a big threat to all organizations. That is why it is so important to implement protective controls around certain fiscal functions. A high-quality bill payment and invoicing service helps separate duties within an organization by systematizing workflow approvals and assigning authorization levels at various steps.

Eliminates checksAutomated bill paying makes accounts payable more efficient because everything takes place online. The bill payment process can happen from anywhere in the world. Once an electronic invoice is properly coded and authorized, a third-party provider will handle printing and mailing checks or electronically paying vendors. The checks are on the third party’s bank account, meaning that an organization is no longer vulnerable to misuse of its checks or the sensitive bank account and routing numbers they contain.

Provides accessibilityThe cloud-based system makes it possible to access the data 24/7 from anywhere in the world, including financial information and dashboard reports.

Streamlines auditsAutomation makes it possible to query information and provide information that is easily accessible during the audit to the auditor or to others as needed.

Saves time and moneyCompared to traditional paper methods, an automated bill payment and collection service reduces processing time, which frees staff members to focus on other tasks. Automation eliminates time spent searching for paperwork, and the check printing process and invoice printing and mailing process becomes a thing of the past.

The Benefits of Automated Bill Payment and Invoicing

We’ve briefly mentioned some of the benefits of accounts payable automation, but now let’s take a closer look at what automated bill paying and invoicing can do for an organization like yours.

11

Employee Expense Tracking and Reconciliation

How is pricing determined? Plans can be based on user activity, such as number of receipts processed, or the number of employees using the system. One may be cheaper than the other.

Can employees use a mobile app to upload an unlimited number of receipts and create and submit expenses from their smartphone? This convenient feature saves time and improves employee satisfaction.

Can employee reimbursements be approved from anywhere? Not only is this a huge convenience factor, but it speeds up the process.

Is it possible to sync the program with your accounting software? When the employee expense portal communicates with the accounting system and is automatically tied to the payroll portal, it saves time and opens the door for real-time access to the data. It also reduces the need for duplicate entry.

Is software training provided for employees? Providing adequate training is the best way to ensure that employees are on board and compliant with the process.

Certain tasks always seem to consume the most time within an organization. Employee expense management is one of those tasks. With automation, it is possible to streamline the process and boost employee satisfaction at the same time.

A good expense tracking and reporting system allows users to create and submit expenses and upload receipts by scanning them with a smartphone. Being able to perform these tasks while on the go improves timeliness and facilitates the reimbursement process. It also eliminates the need to keep track of physical receipts, which can be easily misplaced.

When trying to determine which expense tracking and reimbursement service is right for your organization, be sure to ask yourself these questions:

12

Accounting Software

Increased productivityLike most organizations, staff size is probably fairly lean. A digital accounting solution can free you and your staff for more important tasks.

Simplified processesWith cloud-based accounting software that syncs with other data collection systems, inputting data is easier and quicker. No duplicate data entry is required.

Automated reportsIt is important to make decisions and develop strategies based on real-time, accurate information. Organizations can generate a suite of reports that analyze business practices and facilitate the decision-making process.

Reduced possibility of errorsThe transition from manual to computerized calculations saves time and greatly reduces the possibility of errors.

Around-the-clock accessibilityCloud-based software solutions allow you to access the information 24/7 from any location with an internet connection. So it’s easy to obtain up-to-date information even when you’re traveling.

SecurityUser roles can be customized to your software, which helps protect against any non-approved activity. And cloud-based financial data is protected against unforeseen circumstances, such as natural disasters.

Automating the accounting process of an organization helps to facilitate real-time decision-making. Accounting software should provide up-to-the-minute reports and insights. These tools assist organizational leaders in the strategic financial decision-making process. Like any business, a nonprofit organization must pay attention to a wide range of financial details. Specialized accounting software, with its ability to keep accurate records, is the tool that makes this possible.

Here are some additional benefits to automating your organization’s accounting processes:

13

How Fiscal Management Outsourcing Can Benefit Your Organization

Time and money savingsAutomation saves time because it eliminates the need for manual calculations and recordkeeping. At a higher level, the decision-makers will have more time to focus on strategic objectives and programmatic outcomes.

Virtual deliveryFMA outsourcing requires no physical office space. Services are provided to organizations in any location or those with no central location.

Continuity of staffingYou will no longer have to worry about filling unexpected vacancies in critical financial roles. FMA can provide interim services as a solution to staff turnover and retirements.

Up-to-date technologyYour organization will benefit from modern technology and best practices, which is a necessary component for fiscal management success.

Streamlined auditsWith data always readily accessible, you will experience faster and smoother audits. You may also be able to reduce audit costs.

Peace of mindWorking with seasoned and accountable professionals helps you feel more secure about the entire fiscal management process. The combined expertise of these individuals is a tremendous asset to an organization’s operations.

Dashboard reportingMonthly, quarterly and annual dashboards are easily accessible from anywhere—and they greatly facilitate the decision-making process.

When you make the decision to outsource your organization’s fiscal tasks, it’s safe to say that you will reap both immediate and long-term benefits.

Many of them we’ve already mentioned, but here’s a recap of the key advantages and what you can expect moving forward:

14

FMA: The Right Partner

Working with Fiscal Management Associates means you have access to a customized service that adapts to the needs of your client organizations. This is why our approach is different. We take time to ensure that professionals are carefully matched to the culture of the organization—which we believe is the cornerstone of any successful outsourcing relationship—and we create solutions tailored to the organization’s needs. This is possible because we have a diverse group of qualified individuals with expertise in different areas.

At FMA, we don’t simply crunch numbers. In fact, our approach is quite the opposite. We are focused on serving your mission and programmatic needs with strategically appropriate fiscal management. Our team members bring a wealth of experience and expertise to your organization, and while their goal is to help your organization manage the data, they will also help you understand that data and learn from it.

Clients come to FMA and stay with FMA because we remain focused on coaching and empowering them. Simply put, we help them see where they need to be. With the help of our forward-thinking approach to technology and data, we can arrive at solutions that are tailored to the needs of the organization.

Getting Started

If you’re still not sure that financial outsourcing is right for your organization, it may be time to ask yourself these questions:

Do you get timely financial information?

Do you have access to your data from anywhere?

Good or bad, do you get financial projections to help you know what the future will look like?

15

© 2018 Fiscal Management Associates, LLC

Did you answer “no” or even “sometimes” to any of these inquiries? If so, it’s time to consider outsourcing. If you’re ready to get started, contact us today at 212-931-9112, info@fmaonline.net or www.fmaonline.net.