Imagine you run a small nonprofit that just wrapped up its first major fundraising campaign. You pulled in tons of funds for your organization, allowing you to significantly expand your programming and help even more beneficiaries.

However, once you’ve finished celebrating your big win, you realize that more resources means more time spent on financial management, and you’re already short-staffed. How can you properly manage these funds without the budget to hire another full-time team member?

The answer is to hire a fractional chief financial officer (CFO). In this guide, we’ll explore what exactly a fractional CFO is, how they can help your organization, the benefits of hiring one, and the qualities you should look for when recruiting one for your team. Let’s get started!

What is a fractional CFO?

According to YPTC, a fractional CFO “provides financial services and expertise on a part-time basis.” This way, nonprofits that don’t have the funds to hire a full-time CFO can unlock the same financial expertise at a more affordable rate.

Many fractional CFOs are retired certified public accountants (CPAs), certified management accountants (CMAs), or finance professionals who want to continue helping organizations with their financial management. Alternatively, some fractional CFOs are active, working professionals who prefer a more flexible, autonomous work schedule.

How does a fractional CFO help with nonprofit financial management?

Depending on the services you’re looking for, a fractional CFO can help your nonprofit in various ways. Some of the key financial duties a fractional CFO can handle include:

  • Budgeting. If you need help with resource allocation, a fractional CFO can assist you with the budgeting process. They can also help you monitor budget performance so you adhere to your original resource allocation as closely as possible.
  • Scenario planning. As a nonprofit leader, your primary concern is likely the here and now, but your organization’s future depends on preparing for the unexpected. Fractional CFOs can help you plan for potential financial crises and forecast cash flows to ensure you’re ready for anything.
  • Financial planning and analysis. Similarly, through careful financial planning and key financial metric analysis, a fractional CFO can help you develop a strong strategic plan with clear fiscal goals that set your organization up for long-term success.
  • Data visualization. Sometimes, you need a visual to summarize important data points in a digestible format. Fractional CFOs can create charts, graphs, and dashboards that make it easier to analyze financial data and draw actionable conclusions.
  • Grant management. Securing a grant is only half the battle. A fractional CFO can handle the rest by properly recording, classifying, allocating, and reporting the grants you’ve won.
  • Financial policy creation. Strong financial policies ensure your team is on the same page and follows industry best practices. Have a fractional CFO review your current policies, make recommendations to strengthen them, and fill any gaps with additional procedures.
  • Risk management. While running into financial risks may seem inevitable as a nonprofit, a fractional CFO can help you identify, assess, and prioritize imminent financial risks to stabilize your organization.
  • Accounting system implementation. The right nonprofit accounting system will keep your financial data organized. Lean on a fractional CFO to help you select your software solution, set it up, and migrate data from your existing system.
  • Board and finance committee training. Your board and finance committee have financial responsibilities of their own. A fractional CFO can ensure they’re equipped with the financial knowledge and training they need to execute their roles effectively.

Before you dive into the hiring process, take the time to sit down with your team and establish which financial services your organization needs the most. That way, you can look for a fractional CFO who specializes in those areas and will become an asset to your team.

What are the benefits of hiring a fractional CFO?

Hiring a new team member is always a big commitment. However, it’s also an investment in your nonprofit’s mission and operations. When you hire a fractional CFO, your organization can experience the following benefits:

  • Financial expertise. Your organization should be able to make strong, data-driven decisions based on the financial information available to you. Working with a fractional CFO can help you compile and analyze this data to strengthen your operations. Their expertise will guide you through the financial management process and allow you to find answers to any financial questions you may have.
  • Flexible solutions. Running a nonprofit involves adjusting to constantly shifting needs, priorities, and available resources. A fractional CFO can provide the flexibility necessary to do just that, allowing you to scale services up or down depending on your current situation.
  • Transitional support. Whether you’re restructuring your finances, changing up your leadership team, or experiencing rapid growth, transitional periods can strain your operations and team. If you’re not ready to hire a full-time team member or need interim support while you adjust, a fractional CFO can step in and assist you.
  • Cost-effectiveness. Naturally, paying a team member to work part-time will be less expensive than paying them to work full-time. Your nonprofit can save money by hiring a fractional CFO instead of a full-time CFO and divert the additional funds to other areas.

Most importantly, with your financial management needs covered, you can open up your time to focus on what matters most: your mission.

What qualities should a fractional CFO have?

When your nonprofit hires a new team member, you likely make a list of things an ideal candidate should know, do, or possess—both to keep your hiring team focused and attract the right candidates for the role.

Hiring a fractional CFO is no different. To kick off your brainstorming, we recommend looking for a fractional CFO with the following traits:

  • Financial management background. Perhaps most importantly, your fractional CFO should have a history of working in finance, accounting, or a related field to support their expertise and recommendations. This may include past financial roles, relevant certifications, or other adjacent experiences.
  • Nonprofit experience. Nonprofit financial management has nuances that set it apart from its for-profit counterpart. Ideally, your fractional CFO will have prior experience working with nonprofits, so they’ll have a deeper understanding of your organization’s unique needs.
  • Strong communication skills. While communication is essential in many roles, fractional CFOs, in particular, will be responsible for communicating financial information and guidance to various team members at your nonprofit. Clear, concise communication ensures you can efficiently implement their recommendations.
  • Belief in your mission. What do your donors, volunteers, sponsors, staff, board, and other stakeholders have in common? They must be passionate about your work and feel a call to push your mission forward. The best fractional CFO candidates will have some connection to your cause or, at the very least, an interest in learning more about it so they can eventually share that passion and apply it to their work.

Additionally, your fractional CFO should fit within the context of your broader team. When interviewing potential candidates, emphasize your company culture to see if interviewees align with your internal values.

Whether you’re looking to diversify your revenue, strengthen your internal controls, manage financial risks, or anything in between, a fractional CFO can be a solid asset to your team. This investment in proper financial management can put your nonprofit on track to continued and sustainable growth, allowing you to keep pursuing your mission and making a difference in your community.