The growing trend to outsourcing (and offshoring) bookkeeping and accounting makes as much sense for nonprofits as it does for commercial firms. In fact, some of the arguments are stronger.
Most small businesses outsource their bookkeeping and accounting because it makes good business sense. There is no need to buy the cow when you just need the milk (Old yiddish proverb!) and why carry all the costs of an employee when the business needs to manage costs down to the dollar. A 5% saving in employment can mean all the difference when the gross profit margin is only 10% and most of the expenses are labour. Outsourcing the financials removes the hit on the on-costs such as Workers Compensation, Super, Annual and Long Service Leave, and then redundancy or the costs of exiting the employee. And that's without the costs of supervision, training, employee assistance programs.
The demand for bookkeeping and accounting services are generally surge-based. Invoices go out at a point in time, payroll is periodic, GST and Super compliance is deadline based...Budgets and audit are annual. So bookkeepers and accountants are either over-worked or waiting for something to do... And so their employer is either paying for the under or over-demand of their time, through overtime or supplementary staff, or through time-in-lieu grants. Having in-house employees is not an efficient way to manage surge-based employment.
Qualified and Industry specific
An inhouse team will generally know the business of the organisation better than a contractor, however the substantial improvement in technology means that outsourced providers may very well be expert in your service area, without being required to visit the office. The disruption of cloud based accounting platforms means that the choice of provider is now much wider, and doesnt rely on geography, or office hours, or office equipment - limitations which are now irrelevant. Similarly, there are likely to be better qualified staff where the pool to select from is now limitless.
The employees and volunteers at a nonprofit should all be focussed on the mission. Bringing staff on board, who contribute to the culture and energy of the organisation, should be all about 'the program'. It might be nice for the ED to have a massive head count, but for the organisation to be successful, everyone needs to be on song with the purpose. Staff bookkeepers and accountants want to be loved, want to be heard, and want to have influence. Downside is they can dilute the mission. We need to know the numbers and we need to do the money the right way, but an outsourced provider can do that without being inducted into the culture.
Independence and risk management
There is no clearer argument for independent operations on the accounts than an outsourced provider. The majority of white collar fraud is committed by in-house staff, where there are limits on supervision, quality control, and compliance of policies and procedures. An outsourced company's reputation is based on integrity of the work, and provides to the board and management a second pair of eyes, to ensure risks are managed external to the organisation. Finance staff are not going to be stood over to implement or approve fraudulent transactions when their jobs aren't on the line.
Dont do things you're crap at
Most nonprofits don't have car mechanics, electricians, or travel agents on the team. They know that there are specialist providers who will listen to what they want, deliver what they need, and get out of the way. The day your CEO wants to tweak the website, or take over the database build, is the time to go look for another job. These are 'leaders' who are looking to avoid their main job, and that is build a nonprofit which will deliver its mission. And there are plenty of great outsource providers across a range of fields which are ancillary to the business of the nonprofit.
For a relevant article on managing the risks when selecting an outsourced financial management provider, see http://www.nonprofitrisk.org/library/articles/In_Is_Out.shtml