Why a Fractional CFO is the Right Choice for Small to Mid-Size Nonprofits

Managing a nonprofit’s finances while staying mission-focused is a challenge. For organizations with budgets under $5 million, every dollar counts, yet financial complexity increases as they grow. How can you ensure strong financial oversight without overburdening your budget?

The answer: a?Fractional CFO—a highly experienced financial leader who works part-time or on a contract basis to provide strategic guidance without the full-time salary expense. Here’s why a Fractional CFO might be the best financial decision for your nonprofit.

The True Cost of a Full-Time CFO

Determining whether to hire a Fractional CFO instead of a full-time CFO comes down to financial benchmarks and organizational needs. Below are some key industry insights:

CFO Salary-to-Revenue Ratios in Nonprofits

Nonprofits often assess a CFO’s cost as a percentage of their annual revenue or budget. The data shows that CFO salaries constitute a much larger fraction of the budget in smaller organizations than in larger ones:

These figures illustrate that full-time CFO compensation can consume a disproportionate share of funds in small-to-mid nonprofits, whereas larger nonprofits can more easily absorb a CFO’s salary. As a result, organizations below a certain revenue threshold often find a full-time CFO financially difficult to justify.

The Need for Financial Leadership Without Overburdening Overhead

Nonprofits must balance investing in financial leadership with maintaining reasonable overhead. However, many nonprofits forgo hiring a CFO entirely due to cost concerns, leading to financial mismanagement, compliance risks, and missed funding opportunities. Overhead (management and general expenses, including the finance team) is often kept within an acceptable range so that the majority of funds go to programs. While there is no universal rule, charity watchdogs historically suggested overhead between 15% and 35% of expenses (Nonprofit Leadership Alliance, 2019).

A full-time CFO’s salary alone could consume a large portion of that overhead. For example, in a $1M-budget nonprofit, a full-time CFO making ~$85K represents nearly half of a 20% overhead allowance.

As a result, many small organizations assign financial responsibilities to staff members who lack the necessary expertise or sufficient time. In some cases, nonprofits avoid hiring a CFO altogether, believing they cannot afford it, which can lead to financial instability, costly errors, and a lack of strategic planning., which raises compliance risks and leads to higher accounting costs due to poor accounting practices and misguided financial decisions. Industry experts advise weighing factors like organization size, program complexity, funding diversity, and growth trajectory when determining if a CFO is needed. If those factors signal a need for CFO-level oversight but the budget can’t support a full-time position, many nonprofits mistakenly assume they have no viable options. In reality, a Fractional CFO provides an affordable alternative, delivering expert financial guidance at a fraction of the cost., hiring a Fractional CFO is the prudent choice.

"Every nonprofit, no matter the size, should have a financial system designed by an expert in the nonprofit sector. It saves time and money in the long run."?—? Jesus Pizarro, CPA, MBA, MPA

Why Nonprofits Are Turning to Fractional CFOs

In practice, many nonprofits use Fractional CFO services as a?cost-effective way to gain financial leadership?without committing to a full-time hire.

As one CPA firm notes,?"If your organization lacks the size or complexity for a full-time CFO but still needs high-level financial oversight, outsourcing CFO responsibilities can provide cost-efficient access to top-notch expertise."

A?Fractional CFO?allows nonprofits to pay?only for the portion of CFO time they truly need, keeping financial management proportional to the organization’s scale.

Engage Inter CPA LLC to Navigate Financial Sustainability

At?Inter CPA LLC, we specialize in helping nonprofits achieve financial clarity and long-term sustainability. Our Fractional CFO services provide:

• Financial Oversight?– Gain clarity on budgeting and forecasting to ensure financial stability.
• Capital Allocation?– Strategically manage funding to maximize impact.
• Tax Services (990 Preparation)?– Stay compliant and protect your exemption status.
• Risk and Opportunity Management – Identify financial risks?before they become problems and capitalize on opportunities?on time.?
• Digital Transformation (ERP, Blockchain, AI)?– Leverage technology for operational efficiency.
• Sustainability Reporting (GRI and SDGs)?– Align financial reporting with sustainability goals.

Nonprofits that struggle with financial oversight, compliance, and strategic planning don’t have to choose between overpaying for a full-time CFO or risking financial mismanagement. A Fractional CFO provides the right expertise at the right price—so you can focus on impact.

???Schedule a free consultation today?at?info@inter.cpa?and take the first step toward financial clarity.

References and Additional Reading

Clark, T. (2024).?What are the similarities between a CFO and a Controller??Retrieved from?https://www.terisaclark.com/blog/CFO%20vs%20Controller%20in%20a%20Nonprofit

Nonprofit Leadership Alliance. (2019).?Understanding Nonprofit Overhead Costs: Myths vs. Reality.?Retrieved from?https://nla1.org/nonprofit-overhead-costs/

Meyers Brother Kalicka CPA. (2024).?Is it time to hire a CFO??Retrieved from?https://www.mbkcpa.com/is-it-time-to-hire-a-cfo

Todd, B. (2017).?When & Why to hire a CFO for your nonprofit.?CFO Selection. Retrieved from?https://www.cfoselections.com/perspective/when-why-to-hire-the-right-cfo-for-a-non-profit-organization

Hood, E. (2023).?What’s a fractional CFO & how can they benefit nonprofits in 2025??Intuit. Retrieved from?https://quickbooks.intuit.com/r/running-a-business/fractional-cfo-nonprofits/