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Stephen Newland

Fractional CFO vs. Full-Time Finance Staff: Which Is Right for Your Nonprofit?




As nonprofits grow, so does the need for robust financial management.


With the increasing complexity of financial operations, many nonprofit leaders wonder whether they should hire a full-time finance team member or bring in a fractional CFO.


Each option has unique benefits, and understanding the differences can help you make the best decision for your organization.


In this article, we’ll explore the roles of both fractional CFOs and full-time finance staff, their pros and cons, and the situations in which each might be the right fit for your nonprofit.


What Is a Fractional CFO?

A fractional CFO is an outsourced financial expert who works with your nonprofit on a part-time or project basis. They bring high-level strategic guidance, often at a fraction of the cost of a full-time finance employee.


Here are a few common Responsibilities of a Fractional CFO:

  • Cash flow forecasting

  • Budgeting and financial planning

  • Financial reporting and analysis

  • Preparing grant budgets and reporting

  • Audit preparation


With a fractional CFO, your nonprofit can gain additional financial clarity and free up staff time. This provides the foundation to create a sustainable organization so you can drive your mission forward for many years to come!


The Role of Full-Time Finance Staff

A full-time finance staff member includes roles like a Finance Director, Accountant, or Financial Manager. 


This in-house team is responsible for day-to-day financial operations, ensuring your organization remains compliant, processes payroll, and keeps accurate financial records.


Common Responsibilities of Full-Time Finance Staff:

  • Many of the tasks a fractional CFO does like budgeting and forecasting

  • Managing accounts payable and receivable

  • Overseeing payroll and benefits administration

  • Preparing monthly financial statements

  • Supporting fundraising and grant management


Having dedicated finance staff can provide your nonprofit with a steady presence, but it also comes with higher overhead costs.


Key Differences Between a Fractional CFO and Full-Time Finance Staff

Cost Efficiency

  • A fractional CFO offers flexibility, working on a retainer or project basis, which is often more affordable for nonprofits.

  • Full-time finance staff come with fixed salaries, benefits, and ongoing training costs, which can add up.


Flexibility

  • With a fractional CFO, you can scale services up or down based on your current needs.

  • Full-time staff provide consistency, but it’s harder to scale their involvement as your nonprofit’s financial requirements change.


Level of Expertise

  • A fractional CFO brings a high level of strategic expertise, often gained from working with multiple nonprofits, allowing them to provide deep insights and recommendations for your organization.

  • Fractional CFO’s often work with a team of other CFO’s. If they don’t have the answer to a specific issue in your organization they can easily tap into others on their team who do.

  • Full-time staff have a dedicated understanding of your nonprofit but may lack the broader strategic perspective that a fractional CFO can offer.


Pros and Cons of a Fractional CFO

Pros

  • Access to advanced financial expertise without the cost of a full-time finance staff role.

  • Flexibility to work on specific projects or during peak times, such as annual audits or budgets.

  • Offers a fresh, external perspective, while also working with other organizations which can help your organization make better-informed decisions.


Cons

  • Not always present for day-to-day operations, so additional staff may be needed for daily tasks like preparing payroll and making payments.

  • May not be as deeply embedded in your organization’s culture and team dynamics as a full-time hire.


Pros and Cons of Full-Time Finance Staff

Pros

  • Dedicated team members who understand your organization’s unique needs and culture.

  • Provides continuity in financial management, which can be valuable for long-term planning and relationship-building with donors.


Cons

  • Higher costs due to salaries, benefits, and training.

  • May lack the strategic perspective and broader experience that a fractional CFO can offer.

  • Harder and more costly to make a transition if it ends up not being the right fit.


Which Option Is Right for Your Nonprofit?

The decision between a fractional CFO and full-time finance staff depends on your organization’s specific needs, budget, and goals.


Here are a few things to consider when making the decision:


  • If your budget is limited and you need high-level strategic guidance, a fractional CFO can offer cost-effective expertise in nonprofit financial management.

  • If your organization is growing and requires consistent day-to-day financial operations, a full-time finance staff may provide the stability and focus you need.

  • If your nonprofit needs a mix of both, consider a fractional CFO for strategic tasks like cash flow forecasting and audit preparation, while relying on internal staff or part-time help for daily accounting tasks.


Ultimately, choosing between a fractional CFO and full-time finance staff comes down to your nonprofit’s unique needs.


Both fractional CFOs and full-time finance staff offer valuable services for nonprofits. By understanding the distinctions, your organization can make an informed choice that enhances financial stability and aligns with your mission. Whether you need strategic financial planning or daily operational support, finding the right fit will help drive your nonprofit forward.


While we do offer fractional CFO services, if you’re not sure what would be right for your organization we’d be happy to help talk through it with you.


We’ll be completely honest with you if we think we are or aren’t the right fit for you. 


We serve nonprofits because we have a heart to see great organizations making a difference in the world. So while we’d love the opportunity to serve you we ultimately want what’s best for you!



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