Non-profit Organizations are Widely Outsourcing Bookkeeping Services; Here are The Top Reasons
Posted by: Hitesh Mistry | Posted on: May 24th, 2016
For certain businesses, it is not always about leveraging profits. For such non-profit organizations and NGOs, the sole purpose is to work for a noble cause and betterment of the society. However, this certainly does not mean that these organizations should never pay any attention to their finances.
On the contrary, it is of utmost importance that non-profit closely scrutinizes their fund, as it helps them enhance their program efficiencies. Moreover, a close monitoring of the financial reservoir helps them meet various funding requirements and even overcome the limitations.
It is important for any business, even a non-profit organization and NGOs to gain ample financial intelligence. This gives them a clear picture of their financial condition. However, it is not easy for these organizations, since they have to dedicate their resources towards a noble cause and maintaining an organized financial sheet might be digression from their core activities.
Therefore, these organizations outsource their accounting, bookkeeping and other financial processes to qualified CPA firms, who in turn partner with the professional bookkeeping service providers.
Some of the reasons why outsourcing bookkeeping services has paced up among the non-profit organizations:
1. No digression from core areas as outsourcing mitigates the burden of in-house staff
It is a hardly known fact that most non-profit organizations have to work under incredible budget crunches. Therefore, it is not viable for them to employ more dedicated resources as compared to their profit-oriented counterparts. It often happens that these employees have to juggle multiple roles to create a balance caused due to lack of human resources.
For instance, the head of operations might have to take care of non-core activities like bookkeeping, payroll, human resources, or extend IT support. As it always happens that bookkeeping, being a time-consuming task is often ignored or pushed aside. This apparently makes it difficult to maintain financial records. In order to deal with the human resource and budget crunches, many non-profit organizations are outsourcing bookkeeping as a means for effective division of labor.
Transferring bookkeeping, payroll, and other financial responsibilities to an outsourced service provider, enables in-house staff to concentrate more on other core areas. Once there are no distractions, they can devote their time and energy focus on tasks like engagement building, targeted fundraising efforts, and enhancing program development and delivery.
2. Reduced labor costs
When bookkeeping responsibilities manifolds, it becomes imperative to hire a team of full-time or part-time bookkeepers. This eventually increases the overall cost. This will create a burden on the administrative payroll, along with a rise in the budget for training and setting-up an infrastructure.
By partnering with a bookkeeping service provider in India, a non-profit organization can effectively eliminate the guesswork, which involves determining approximate annual expenses. With enhanced ability to plan the annual budget, they can begin building scheduled and recurring payment on a monthly basis. Moreover, organizations that outsource bookkeeping generally experience an overall reduction in the costs, as compared to having in-house human resources. Further, this cost-savings allow the organization to hire more dedicated resource or improve the current pay structure. Besides, this even helps to further mitigate the expenses usually associated with turnovers.
3. No delayed or incorrect tax returns
While a majority of non-profits generally get an exemption from the tax, they are still liable to file returns annually for the IRS. Actually, tax return involving non-profits is one of the most complicated processes, since there are numerous rules which consist reporting revenues and expenses for 501C3 organizations.
Non-profits organization has multiple revenue generation points like offers, fundraising, donation or admission fees for some exhibition or recreational program. Irrespective the source of revenue organization, it is important that these sources are reflected appropriately on the tax forms.
For an instance, some donors act as sustainers – they donate on a regular basis each month. While, there other donations which come as in-kind contributions or one-time gifts. These donors usually require receipts and other tax-related documents to write off it as their contributions. A professional bookkeeper possesses expertise to prepare and manage these records, so that they are easily retrievable.
Outsourced bookkeeping service providers have the knowledge, expertise and resources required to handle these financial operations. Moreover, they even navigate the non-profit organizations and NGOs to continually track the changing tax standards. This further mitigates a difficult tasks for a nonprofit that are usually understaffed and under-budget.