Outsourcing Services: A Three-Tiered Approach

Success of Any Nonprofit Starts with Effective Transactional, Managerial and Strategic Support

In every nonprofit organization, fiscal management services typically fall into three categories of support: transactional, managerial and strategic. Within each of these levels, an organization must accomplish specific tasks related to financial planning, monitoring, operations and governance. But how does the process unfold? What ensures that it will operate effectively without losing sight of the organization’s mission? To answer these questions, let’s take a closer look at each category and the specific services provided.

Transactional Support

Automating transactional tasks such as accounts payable, accounts receivable, employee expense reimbursements and payroll allows organizations to focus on other, more mission-critical areas. Keep in mind that when the transactional function is automated, data can be entered into any system in a more timely and cost-effective manner.

Transactional support helps a nonprofit organization execute a wide range of activities that take place on a daily basis. Vendor payment and donation processing can be accurately recorded and checked to ensure compliance with current policies and procedures. Similarly, payroll processing is greatly facilitated, with services that extend beyond what a payroll processing firm can offer, such as automating employee expense reimbursements and having the transactions automatically sync to the accounting package.

The task of reconciling bank accounts is an important one and should take place on a monthly basis. Without up-to-date reconciliation, it’s difficult to determine and analyze the current financial health of the organization and plan for cash flow and other future decisions. Together, all of the above services make up the transactional portion of outsourcing services. They are critical to maintaining the day-to-day integrity of the data and should be executed and reviewed monthly.

Managerial Support

When data is entered into the system on a timely basis, it paves the way for real-time reporting, which is necessary for managerial review, monitoring and oversight. This, in turn, allows the organization to be much stronger strategically. While strong management is critical to the sustainability of any organization, it is especially important when it comes to the financial operations.

Organizations work with outsourcing providers in a variety of ways. For instance, an organization may decide to engage either with the outsourced staff remotely or in-person on an as-needed basis. They may also use managerial support to supplement current in-house transactional individuals. The timing of these services may vary as well, with some entities choosing a weekly or monthly face-to-face meeting, augmented with remote support at other times. Whatever you decide, it helps to automate the transactions as much as possible so the data are always available to be reviewed and analyzed from anywhere.

A good outsourcing provider will also work with you to customize financial reports and dashboards that are accessible, updated frequently and capture the needs of your organization. In addition, an internal reporting package can be produced on a monthly basis for internal communications and tailored to the needs of program leaders, the development office and the board finance committee. Accurate transactional data and relevant and timely managerial closes create a foundation for the development of good strategic financial management.

Strategic Support

This is where it all comes together. The transactional component provides access to timely, quality data, while managerial support ensures that the data is accurate and useful. The strategic level is responsible for using this information to enact higher-level strategic decisions that drive the organization forward.

At FMA, we empower leaders to adopt a forward-thinking approach that engages stakeholders from across the organization, building a team that works together to monitor the organization’s finances. Organizational leaders often wear many hats and it’s imperative to make the best use of their time. This is where leadership coaching can also make a difference. It provides guidance on understanding key financial matters and insight on how to build effective teams.

To be successful, both financially and strategically, an organization must be strong at all three levels. It is hard for a bookkeeper entering data at the transactional level to think strategically, but someone in the organization still needs to input data into a system. Similarly, an organization may not need a full-time CFO, but it will occasionally need the critical thought process at the strategic level. The bottom line with outsourcing the finance function is that you pay for what you need—only when you need it.

Management cannot function effectively without access to timely transactional data, and strategic decision-making is impossible without the good data and managerial planning and monitoring to back it up. Partially or fully outsourcing these functions to an expert provider like FMA can help ensure that an organization’s fiscal management is resilient and sustainable during periods of growth, stress and strategic shift.

To learn more about financial outsourcing and the three levels of support, visit our outsourcing page or let us know how we can help!


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