1. Does the outsourcer provide only church bookkeeping or also accounting services? And what’s the difference?
In a nutshell: accountants supervise bookkeepers.
Bookkeeping refers to the clerical work necessary for recording transactions, such as: a) recording and paying bills; b) depositing donations; c) recording donor information into the donor database; and, d) reconciling bank statements.
Accounting includes: a) reviewing the work of the church bookkeepers; b) designing and maintaining the bookkeeping system; c) troubleshooting complex financial transactions; and, d) preparing monthly financial reports for management.
Significantly more employee time is spent at the bookkeeping level than at the accounting level. However, that should never rule out the critical need of having accounting supervision at all times.
Frankly speaking, an unsupervised church bookkeeper is a dangerous proposition for your church.
Sound accounting policies, procedures and processes should be reviewed and maintained by a qualified accountant. Complex transactions should never be solved by the church bookkeeper.
So if you don’t have the requisite accounting supervision in-house, then please make sure your outsourcer is not just your bookkeeper.
2. Is the outsourcer transactional or custom service oriented?
In other words, does the outsourcer operate under a one size fits all way approach, or is the outsourcer sensitive to your unique and particular ways of doing things?
A great indicator is to have the outsourcer elaborate on best practices. To what extent is the outsourcer engaged in best practices?
A good example would be reporting. Does the outsourcer provide you with their financial reports, or are they willing and interested in providing you with customized reports that fit your particular needs?
3. What is the pricing model?
It’s probably a red flag if the outsource bookkeeper is pricing the cost based on a flat percentage rate of revenue. As revenue increases, accounting and bookkeeping costs, should be lower as efficiencies in operations will result.
4. Does the outsourcer have industry specific non-profit experience and expertise?
Does the outsourcer speak your language? Can the outsourcer quickly and succinctly discuss the nuances to online giving, housing allowances, commissioning, and capital campaigns?
5. Does the outsourcer have established relationships with other industry vendors?
This question is really an extension of the previous question. If the outsourcer has church experience, then the company should have connections with online giving vendors, background check vendors, church management software vendors and the like. As a result, these established relationships should result in your church having reliable solutions and perhaps cost savings.
6. What does the outsource team look like?
This question is an extension of the first question. Ideally, the outsource team will assign a bookkeeper for you in addition to a qualified Controller and Chief Financial Officer. What are the qualifications and experience of the Controller and Chief Financial Officer? Can the Chief Financial Officer adequately articulate how the team works together to protect your financial interests?
7. Is the outsourcer actively engaged in the church world?
Ideally, you want your outsourcer to act as your eyes and ears to all of the happenings in the church industry. At MinistryCFO, one of our greatest joys is to pass on the latest ideas, insights, and strategies that we run across in our work. We are always in a learning mode, and that includes learning from our clients.
8. What are the terms in the Engagement Letter?
The engagement letter is essentially a letter of understanding, including expectations, between your church and the outsourcer. Look carefully at the duration term of the engagement letter. Does the life of the agreement extend beyond one year? Do you have a one-month notice of termination clause? You should.
9. Does the outsourcer have professional liability insurance?
Although unlikely, unintentional mistakes can happen, so your outsource contractor needs to be bonded.
This usually goes without saying, nevertheless, make sure you get several references and be sure to ask them the question: What is working and what is not working for them?