When a nonprofit needs more accounting capacity or expertise, the next question is how that support should be structured. The right answer is not always a new hire – or a fully outsourced finance function. Some organizations need dedicated internal staff. Others need specialized outside support. Many benefit from a hybrid structure that combines internal knowledge with outside capacity or higher-level expertise.
A useful way to frame the decision is: What level of financial support does your nonprofit need now—and what will it need as it continues to grow?
For some organizations, hiring internally makes sense. Others may benefit from outsourcing much of the accounting function. And for many nonprofits, a hybrid approach can fill the gap between the two. The answer depends on the organization’s workload, complexity, internal capabilities, and the level of financial oversight it needs.
Your Finance Team Should Grow With Your Organization
Nonprofits do not have to choose between handling everything internally and outsourcing the entire finance function. Support can be structured along a spectrum based on the organization’s needs. You may need controller-level oversight but not have enough work to justify a full-time controller. Or perhaps your accounting staff handles routine processes well, but month-end close, financial reporting, audit preparation, or cash flow forecasting require more specialized support.
The common models look something like this:
| Consideration | Internal Team | Hybrid Approach | Outsourced Accounting |
| Day-to-day accounting | Handled internally | Internal or shared | Can be outsourced |
| Month-end close | Internal | Shared | Outsourced |
| Financial oversight | Internal | Outside expertise added as needed | Outsourced |
| Controller/CFO expertise | Requires internal expertise or hiring | Available as needed | Available as needed |
| Staffing and coverage | Managed internally | Additional outside capacity | Team-based coverage |
| Scalability | Typically requires hiring | Support adjusts with needs | Support adjusts with needs |
| Best suited for | Organizations needing dedicated internal resources | Organizations with capable staff that need added expertise or capacity | Organizations that want an external team to handle much of the accounting function |
When Hiring Internally Makes Sense
An internal finance team can be the right choice for nonprofits that have enough ongoing work and resources to support dedicated accounting professionals. Internal employees are immersed in the organization’s programs, culture, and daily operations, while leadership maintains direct oversight of priorities and workload.
As your finance needs grow, however, adding another position is a larger investment than salary alone. The cost of building an internal team can also include:
- Payroll taxes and employee benefits
- Recruiting and onboarding costs
- Training and ongoing professional development
- Accounting technology and software licenses
- Management time required to oversee additional staff
Those costs can become more significant as an organization moves from hiring accounting staff to adding controller- or CFO-level positions, where compensation and specialized expertise typically increase.
If your organization needs dedicated finance professionals on a full-time basis and has enough ongoing work to support those roles, the investment may make sense. If the need is more targeted – additional capacity, specialized expertise, or higher-level financial guidance – a hybrid or outsourced model may be a better fit.
When a Hybrid Approach Makes Sense
Sometimes your nonprofit already has the right people but needs more support around them. For example, internal staff may handle accounts payable, payroll, receivables, and other routine processes while an outsourced team assists with month-end close, reconciliations, financial reporting, internal controls, audit preparation, or higher-level financial guidance.
Another organization may already have an experienced accounting manager or controller but need CFO-level support for budgeting, forecasting, board reporting, or strategic financial planning.
A hybrid structure allows the organization to keep responsibilities that make sense internally while bringing in additional capacity and expertise where needed.
When Full-Service Outsourced Accounting Makes Sense
Some nonprofits may prefer not to build or manage an internal accounting department. In those situations, an outsourced team can serve as an extension of the organization’s finance function and take on significantly more of the accounting process.
Depending on the engagement, outsourced support can include:
- Recording and categorizing transactions
- Reconciling bank, credit card, loan, payroll, and other accounts
- Maintaining fixed asset records
- Preparing financial reports
- Supporting month-end and year-end close
- Assisting with certain payroll or accounts payable processes
- Preparing financial information for audits and tax filings
- Providing controller- or CFO-level oversight and guidance
Rather than relying on a single hire, the organization can also gain access to professionals at different levels of experience. This can provide additional coverage, specialized expertise, and the ability to adjust support as the organization’s needs change.
How Do You Know Which Approach Is Right?
Start by identifying what the organization needs its finance function to do – and where the current team may have gaps:
- Does your existing team have enough capacity to keep up?
- Are month-end close and financial reporting timely and accurate?
- Do you need expertise that isn’t currently available internally?
- Are you considering a controller or CFO because you need a full-time employee—or because you need a higher level of financial guidance?
- Would additional support strengthen your existing team, or do you need someone to take on a larger portion of the accounting function?
- Do you have the resources to recruit, train, manage, and retain additional finance professionals?
The goal isn’t simply to determine which option costs less. It’s to build a finance function that provides accurate reporting, appropriate controls, reliable support, and useful financial insight.
For some nonprofits, that means a dedicated internal team. For others, it means outsourcing much of the accounting function. And for organizations somewhere in the middle, a hybrid structure may provide the right combination of internal knowledge and outside expertise.
Not sure what level of accounting support your nonprofit needs? LSL’s nonprofit accounting team can help evaluate your current processes, staffing structure, reporting capabilities, and future needs to determine whether an internal, outsourced, or hybrid approach makes sense for your organization. Contact us today!
