How to outsource accounts receivable services for non-profit organizations?
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For non-profit organizations aiming to enhance efficiency and emphasize its mission, outsourcing your accounts receivable makes sense. Most organizations do not have the staff, time, or resources to manage in-house bookkeeping, especially smaller or mid-sized organizations. Below is a complete outline of how to successfully outsource accounts receivable services while maintaining trust and financial accountability for your non-profit organization.
Clearly Define the Unique Needs of Your Non-Profit
Non-profit agencies rely on contributions, grants, and donations rather than revenues from sales of goods and services. This creates accounts receivable challenges that are not typical for for-profits, such as pledging, donor information, restrictions on usage of donations, and additional compliance requirements. Before outsourcing, clearly identify what, specifically, you want assistance with: donor invoices, pledge accounts, grant receivables, etc. This will help you identify the best outsource partner.
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Research Outsourcing Providers
Explore outsourcing providers who have either worked with a nonprofit, or who have services aimed at nonprofits. Organizations who work with nonprofits will have insights into donors’ nuances around tax-exempt status and reporting requirements, to name a few. Be sure to look at their qualifications, client reviews, and ask for case studies relevant to your nonprofit.
Consider Tools and Integration Capability
Your outsourcing partner should have good accounting software that integrates well with your organization’s donor management system or CRM. Automation will enhance speed and reduce errors in process, and therefore we encourage you to ask as many questions as possible with respect to data security, particularly as nonprofits are holding sensitive donor information and need to comply with GDPR, HIPAA or whichever mandates are legal for your state.
Understand Our Service Level Agreements (SLAs)
By discussing the SLAs upfront, it is possible to establish expectations around expectations from payment collections, expectations around reporting timelines, expectations on how disputes will be resolved. Also, the SLAs should have confidentiality requirements and provide information as to how often the organization would receive updates or analysis to learn about the accounts receivables performance.
Communicate and Oversee
Outsourcing does not imply giving up control. Designate personnel to maintain a permanent and frequent form of communication with the staff working remotely. This will assist in supporting and supervising the firm in the construction of the project. The regular meetings will keep you current on cash flow status, pledges outstanding, or uncollected funds, allowing you to act on any emerging issues.
Consider Cost vs. Value
Nonprofits often choose to outsource for cost savings; however, other benefits to consider include value-added benefits of more accuracy or expedited collections, or compliance expertise. A higher cost may be warranted if it allows your team to dedicate time to fundraising and program delivery.
Train Your Team to Collaborate
Be sure your internal team is trained on the outsourcing process, and understands how to collaborate with the outsourced team. Training on the process of sharing data, timelines, and roles will minimize any ambiguity and make for smoother hand-offs.
Track Results and Iterate
To sum up: Track KPIs around days sales outstanding (DSO), collection rates and donor satisfaction to help you with continuous improvement of your outsourcing arrangement to ensure you are meeting your ongoing needs.
Outsourcing accounts receivable services helps create a workable model to optimize financial management and focus on the mission for non-profits. The careful selection of an expert partner and encouraging open communication goes a long way to provide risk mitigation to protect its financial health and philanthropic relationships.
