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Why Do Non-Profit Organizations (NPOs) Outsource Their Back-Office Work?

By September 13, 2021March 4th, 2024No Comments
Non-Profit Organizations NPO Outsource

A Non-Profit Organization (NPO), in contrast to a usual profit-making business, is incorporated and executed to provide services for societal, public, and communal benefit. Unlike regular organizations, these entities do not run to earn a profit. Any excess of revenue over expenditures does not go to the private parties and is used to fulfill the organization’s mission and objectives.

As per the data of the National center for charitable statistics, more than 1.5 million Non-Profit Organizations operate in the USA. Most of these Non-Profit Organizations include chambers, charitable societies, trusts, educational institutions, fraternal organizations, and various other types of NPOs. Incorporation and service offerings of NPOs require numerous formalities and rules that need to be accomplished.

Rules and regulations Required to be Met by NPOs in the USA

Non-Profit Organizations, which offer societal services, are regulated at the state and federal levels. These regulations allow these organizations to secure tax exemptions on income. The laws specify certain rules like who will be the board members, who will become in charge of NPOs, and what will happen in case of an operational shutdown. Following are certain rules and regulations regarding NPOs:

  • Rules regarding incorporation: 

The incorporation requirements are quite similar to profit business. The laws state that these businesses need to file an article of incorporation to the secretary of state who deals with the NPOs. Along with articles, these require filing an objective of the organization.

  • Registration requirements for Donation and fundraising activity: 

The laws have specified that the organization can avail donations without giving anything in return. In case the NPOs give any return, then they can lose their tax-exemption benefits. To avail donations and fundraising, these firms need to register with the officials in the state in which the donation activity will proceed.

Work management of Nonprofit Organizations comprises multiple tasks that are related to their core objectives.

Operational Issues related to NPOs

As the NPOs deal with donations, fundraising, and various tasks regarding finance and data management. The organizations face issues mainly, with regard to data management and back-office work that handles the entire system of these firms. Some issues for NPOs are:

  • Issues related to fundraising processes:

Among all existing issues, fundraising processing creates a major challenge for the firms. As per Nonprofit Leadership Council Survey, During COVID 19, fundraising became the key issue for NPOs. These NPOs rely on funding entities for their support. Management of data related to fundings and its recording becomes tedious that require an expert service management team.

  • Donation processing:

Like fundraising, donation activities involve huge data regarding donation funds. Firms need to maintain proper records and perform processes related to fund availing parties and their separate records.

  • Financing and accounting maintenance issues:

To create a proper record for a single dollar, finance and accounting management tasks must be performed with accuracy. A well-trained expert management team is required to manage the finance-related data of the firm.

Apart from these issues, some key issues are in respect of talent acquisition, data processing, back work management, and management of virtual training.

Why In-house automation of NPOs Does not Work?

Due to large paperwork and huge data sets, the organizations demand an automation service that can reduce their workload. Multiple outsourcing companies provide AP automation software to systematize huge data and back-office work within an organization. The use of Automation reduces the workflow time that utilizes in primary objectives of NPOs.

However, automation within an office also requires tremendous training activities, and additional man-hours to manage the process. This imposes an extra cost on NPOs. It also takes away essential time from fund-raising activities and other core activities of an NPO.

To avoid these issues, outsourcing the work is often the top choice.

Why Do Non - Profit Organizations Look at Outsourcing their Back-Office Work?

Ensuring complete fund management and back-office work, the outsourcing companies offer NPOs a lower-cost alternative. NPOs require the service of outsourcing company due to excess workload, related to fundraising, donation tracking, funding and grant application processing, and other management activities. In 2019, As per the Nonprofit sector report 2019, total assets and revenues of NPOs are $3.79 trillion and $2.04 trillion respectively. Such huge funds require proper management that raises the need of outsourcing.

Non-profit Committee of New York specifies certain areas for outsourcing:

  • Financial management, accounting, and book-keeping.
  • Fundraising activities.
  • Skill management and legal services.
  • Communication and marketing activities
  • IT-based activity

Non-profit businesses prefer outsourcing due to the various advantages gained from BPO outsourcing. Some of the advantages are:

  • Operational cost reduction: 

Outsourcing reduces the overall cost as the outsourcing firms provide specialized processing with an experienced team. It reduces operational expenditures in repetitive tasks such as data entry. Cost reduction can be faced in every dimensional activity with outside services.

  • Improvement of performance: 

According to San Jose State University research, in case the primary, competitive, and supplier-related uncertainties remain in control, then Outsourcing improves the performance. With the outsourcing facility, NPOs can avail better services due to high-performing software and trained experts.

  • Focus on core objectives: 

Non-profit outsourcing helps the NPO to focus on their core business objectives that might get disturbed due to the heavy workloads. Outsourcing the transaction processing tasks provide an opportunity for the NPOs to better perform on their key objectives.

These are few advantages that induce the NPOs to avail of outsourcing services.

What Back-Office Work Can Non-Profit Organizations Outsource to ADREM

ARDEM provides Business Process Outsourcing Services and Business Process Automation Services to established Non-Profit Organizations to help them reduce their Back- Office Costs and Improve their Operational Efficiency.

ARDEM helps NPOs in the following processes:

Some recent work we have completed for Non–Profit Organizations has been

  • Processing funding/grant applications for distribution of funds
  • Processing of market outreach surveys to gauge impact of a program
  • Processing of donation card data
  • Processing of Hospice data
  • Processing of data for international relief and community development agencies

For additional information please reach out to us at ARDEM by email at, or, call us at 908-359-2600.