Summary: In today’s podcast episode, Stephen Halasnik and Eric Thomas discuss how outsourcing can benefit nonprofit organizations. Effectively staffing a nonprofit can be a difficult task, and outsourcing is a viable option for nonprofits looking to optimize their budgets and back-office functions. Many nonprofits may be unfamiliar with outsourcing, so Stephen and Eric will fill you in on how to get started and what you can outsource.
What Is Outsourcing?
Outsourcing is a business practice of hiring a party from outside the company to create goods and perform services normally done by in-house employees and staff. This can be legal needs, accounting, HR, anything regarding financial information, and other back-office functions. This strategy can be very effective in cost savings for organizations in the nonprofit sector.
Nonprofit Outsourcing Has Two Big Drivers
Outsourcing is important for nonprofits due to two big drivers:
- Most local and regional NFP’s that make the most impact in their communities do not have the sufficient scale to support the back-office services that they need. They still need to report to external parties such as their board of directors, board members, and the IRS. They need immediate accurate information to make financial decisions.
- The primary measurement of a nonprofit’s success can be greatly affected by its expense ratio. Staffing a nonprofit can skew its expense ratio making its expenses a lot higher than it needs to me. With the arrival of cloud-based technology and organizations leveraging the internet, nonprofits now can outsource not only some of their staff but also their technology such as tech stacks and service stacks to service providers, which can optimize the ability of the nonprofit to the right-size their back-office support.
What Small Nonprofits Can Outsource
If it is not a core competency of your organization, programmatic development, or mission-related you should consider looking to outsource. Most people would not change the oil in their car, they would bring it to someone who specializes in oil changes and does it all day. If it is not why you started or joined the organization – look to outsource it. The benefits of outsourcing stretch through multiple areas of business practice. This can be marketing, accounting, social media coordination, information technology, human resources, legal strategy, and annual strategic financial planning sessions, among others.
Think to yourself: do you need a full-time CFO to come up with a long-term strategic plan, or do you need a part-time CFO to come in and help with that?
When constructing your annual plan or 5-year vision, look at what defines your organization and supports your community. If you have needs that do not fall in line with these, look for alternative help such as outsourcing to help you focus on your mission.
Define Your Culture
Nonprofit Executive Directors and entrepreneurs who have experience with nonprofits/businesses know the importance of staffing up and bringing on the right people. The same goes for outsourcing, you must look for service providers that fit your culture. After gaining experience with the process, you may learn that outsourcing is an optimal solution.
More employees can lead to more problems and of course more cost. As a nonprofit, you may not know where your cash flow is coming from next, and it can change often, leading to layoffs. Fundraising and budgeting become very important when your funding comes from a select few areas. So, the ability of a nonprofit to be nimble when it comes to staff cannot be understated.
Employee Risk Mitigation
If there is not an existing department for what you are looking to outsource, it can be difficult to accurately identify the appropriate skillset you need in a candidate while verifying their experience, and furthermore retaining that employee and eliminating employee burnout. It is a challenge to attract, hire and retain exceptional employees. Local nonprofits may not be growing, and your qualified staff members will look for a career path that includes career growth. You can hire staff and acquire stakeholders who stand by your mission and will stay on board but retaining back-office personnel can be hard to do. By outsourcing your staffing, you substantially mitigate that employee risk by putting it on your outsourcing provider.
Find The Right Fit
You may find someone who believes in and is very passionate about the mission but does not contain the skillset for certain areas of the nonprofit. This could be a full-time bookkeeper who supports the vision of the nonprofit but is not very qualified for that position. Bookkeeping is a very common outsource for nonprofits, and you can find part-time CPA’s to perform all nonprofit accounting needs. Look to redirect the staff member into mission activities. Repurposing the employee and outsourcing the work to experts is not just cost-effective but it applies skill more appropriately to an organization’s needs and thus other employee benefits as well.
All in all, outsourcing is an effective method for your NFP to be cost-effective. Outsourcing provides real help to organizations and can streamline many functions in varying departments.
I would like to thank so very much Eric Thomas, Partner at Armanino. If you like today’s podcast, please feel free to share it with a friend and also subscribe to your favorite podcasting app. If you liked today’s podcast please give us a review on your podcasting app to help us get the word out, and of course, if you are looking for a Line of Credit for your nonprofit, you can call us at 862-207-4118 or visit our website at nonprofitmbapodcast.com.
Thank you all for making the world a better place.
About the Guest Eric Thomas, Armanino
I am excited to be speaking with Eric Thomas who is a Partner with Armanino
Armanino is one of the top 25 largest independent business consulting and accounting firms in the United States. They are a nationwide leader serving privately held companies and private individuals, as well as nonprofit organizations and public entities.
Eric is a consulting partner with more than 20 years of experience serving nonprofit organizations. Since joining Armanino he has focused on helping nonprofits with accounting services and financial management so they may focus on developing their organization and delivering on their mission. He works with a diverse group of clients on their digital transformation and believes that regardless of size and age, organizations can benefit from incorporating enterprise best accounting practices through a solution that uses cloud technology and paperless processes.
Prior to joining Armanino, Eric led accounting and finance functions at Robert Half, Analytic Services, and Serco NA. He received a B.S. in business administration from West Virginia University.
About The Host Stephen Halasnik, Financing Solutions
Stephen Halasnik is the host of the popular, The Nonprofit MBA Podcast. The Nonprofit MBA podcast’s purpose is to help nonprofit leaders. Mr. Halasnik is the Co-founder and Managing Partner of Financing Solutions. Financing Solutions is a leading provider of Lines of Credit to nonprofits and small businesses.
Mr. Halasnik is a graduate of Rutgers University and has an Executive Masters from the MIT Birthing of Giants Entrepreneurship program. Mr. Halasnik is a best-selling Amazon author and is considered a leading authority on building great, purpose-driven businesses. Mr. Halasnik lives in New Jersey with his best friend, his wife Gina. Mr. Halasnik’s number one purpose is raising his two boys, Michael and Maxwell, to be good men.
About Financing Solutions Nonprofit Line of Credit
Financing Solutions nonprofit financing product is a great alternative to a traditional bank line of credit because it costs nothing to set up, nothing until used, and when used, is inexpensive. The credit line requires no collateral and no personal guarantees.
Nonprofit Organizations use their line of credit to help with emergencies or opportunities when cash flow is temporarily down (i.e. Payroll funding)
Please feel free to fill out the no-obligation, 2-minute nonprofit line of credit application here. The time to set up a credit line is when you don’t need it so that it is ready to be used, just in case.