Key topics covered in this article:

  • Comprehensive Financial Support: Outsourced accounting helps nonprofits manage financial operations, including AP/AR, payroll, compliance, and Form 990 filings, ensuring accurate reporting and transparency. 
  • Enhanced Internal Controls: By separating duties and implementing approval processes, outsourced accounting reduces risks like fraud and strengthens organizational safeguards. 
  • Technology and Advisory Benefits: Leveraging secure accounting platforms and expert advisory support, nonprofits gain better financial insights and proactive strategies to achieve mission goals. 


Running a nonprofit involves more than program management and fundraising. Leaders are also responsible for financial reporting, compliance, audits, and board oversight. These responsibilities have only grown in recent years. Many organizations today are managing the increased workload with the same small teams and limited resources. As the demands continue to grow, outsourced accounting is emerging as a solution to a wide range of financial and compliance challenges. This type of support often gives nonprofit teams more room to focus on the critical mission work ahead of them.  

Outsourced Accounting for Nonprofits

Outsourced accounting refers to ongoing financial support delivered by an external team. Instead of touching base with an accountant once per year, nonprofits work with experienced professionals to manage part or all of their accounting function on a regular basis. 

 This can supplement an internal finance team or take on the responsibility of certain back-office areas such as transaction processing, reporting, or compliance. In some cases, services extend to controller and CFO-level guidance, depending on the organization’s structure and needs. 

Why Choose Outsourced Accounting

Outsourced accounting for nonprofits often covers much more than bookkeeping. In many cases, it functions as a specialized extension of the nonprofit’s finance team. 

Accounting Operations — At the operational level, outsourced teams can handle AP/AR, payroll, and balance sheet reconciliations. They generally manage the monthly close and keep the general ledger current. These routine tasks are the foundation of accurate financial record-keeping, and this data supports every other aspect of financial management, from reporting to audits. 

Financial Reporting — Accurate records lead to stronger financial reporting and better financial insights. Many outsourced engagements also include preparing and reviewing monthly financial statements, budget-to-actual reports, and cash flow summaries. These reports are then used by leadership to monitor performance and are often shared with nonprofit boards. 

 However, not all nonprofit board members are familiar with interpreting financial statements. That kind of gap can affect oversight, since board decisions depend on a clear understanding of the organization’s finances. That can lead to missed opportunities or even an overextension of resources. Outsourced accounting can help by providing reports and explanations that make it easier for boards to understand the numbers and ask informed questions. 

Compliance and Public Reporting — Nonprofits are required to track restricted and unrestricted funds, meet grant reporting requirements, prepare for audits, and file Form 990 each year. Outsourced accounting providers are well-prepared to support all of it.  

This includes helping nonprofits navigate Uniform Guidance issued by the OMB, which sets standards for managing, documenting, and auditing federal awards. It also includes managing sometimes complicated requirements related to unrelated business income tax (UBIT), payroll taxes, and state and local taxes such as sales and use tax. 

Outsourced accounting teams are also equipped to handle Form 990. This is a filing requirement, but it’s also a public document that is often reviewed by donors and watchdog organizations. With nearly 70% of donors saying that trust and financial transparency influence their giving decisions, this filing is important for nonprofits of all sizes.  

Technology — Outsourced accounting providers typically work with well-known accounting platforms rather than relying on spreadsheets. This makes it easier to track transactions and produce reports on time. It can also maintain continuity during times of staff turnover or role changes. 

 Most importantly, these platforms strengthen data security. Nonprofits have become more frequent targets for cyberattacks, and donors consistently rank the protection of personal information as highly important. Keeping financial data in controlled systems helps reduce the risk of errors or unauthorized activity. (Learn more about safeguarding donor data.) 

Internal Controls — Internal controls are just as crucial, but they are often difficult for nonprofits to implement, especially when finance responsibilities are concentrated with one or two people. Outsourced accounting can help by separating duties and setting approval processes, among other key controls.  

These controls exist to protect the organization. It’s important to note that the ACFE reports that the median loss from occupational fraud in nonprofits is $76,000, and that most cases involve weak internal controls. This is a key area an outsourced provider can help with.  

Advisory — Once core reporting and controls are in place, advisory support helps leadership interpret the numbers and understand what’s driving results. This often means working with an accounting professional who understands the nonprofit sector and stays up-to-date with any changes to tax laws and other requirements. That perspective helps organizations be more proactive with their mission goals.  

Making the Transition

Outsourced accounting is not a one-size-fits-all solution. Many nonprofits begin to consider making the transition when experiencing growth or operating with administrative teams that are stretched too thin. It may also be beneficial for organizations preparing for an audit, a major grant application, or a leadership change. Some boards may be looking for more consistent financial reporting, and outsourced accounting solutions can help in that area as well.  

When choosing a provider, nonprofits will want to look for a team that understands the nonprofit sector and can grow with the organization. It’s important to ask about experience with grants, audits, and reporting requirements, as well as how the provider handles data security and access controls. Many nonprofits also look for support that can integrate with an existing team. 

Note: Outsourced accounting does not have to replace an internal team. Many nonprofits use outsourced support to strengthen existing staff, fill gaps, or provide expertise that is not needed on a full-time basis. 

Looking Ahead

Outsourced accounting is a solution that nonprofits stay ahead of financial and compliance demands and frees leaders to concentrate on mission work. With dedicated accounting support, organizations are better positioned to make decisions and plan for what’s next. For more information, contact PBMares Not-for-Profit Partner Bo Garner and Outsourced Accounting Partner Bradford Jones.