When Should Your Nonprofit Begin to Outsource?

When it comes to outsourcing support in the nonprofit world, many executives cringe when they think about how funders or team members will respond to the thought of not having formal staff completing essential tasks. However, outsourcing is not a new concept and may have many benefits for some nonprofits.

Most small nonprofits already outsource many of their “back office” activities, such as finance, accounting, HR, and some other administrative functions.

Benefits of outsourcing for these back-office administrative functions for nonprofits can mean saving of up to 20% on personnel costs, improved efficiency in office operations, reduced overhead expenses, and reduction in costs for technology to manage the nonprofit finance, IT, and cybersecurity functions.

In addition to these benefits, outsourcing can help unlock group purchasing capabilities for employee benefits, latest technology, and other items that may be more expensive if purchased by the nonprofit individually. A bonus of outsourcing is the access to professional advice and counsel to important and critical issues facing nonprofits.

Outsourcing some services also helps nonprofits reduce potential risk from receipt of volunteer support to manage operations or from stretching the already-busy staff too thin. In these instances, there are increased opportunities for loose bookkeeping practices, lack of compliance oversight, and reduced efficiencies in processing and approving necessary actions.

What back-office activities might nonprofits consider outsourcing?

  • Information technology-related activities
  • Financial management and bookkeeping
  • Human resource management and legal services
  • Fundraising-related activities
  • Marketing, communication and risk-management activities
  • Purchasing and vendor management

So, how do you know when it’s time to outsource? Evaluating the organization’s finances, along with current and needed capabilities, is the best way to determine when it is time to outsource some of the in-house functions your nonprofit currently has.

Outsourcing can be very beneficial for nonprofits that do not have the capacity or skills to manage the numerous business processes. But it should certainly be considered as each nonprofit makes decisions regarding their strategic focus in years to come.

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