What is a Fractional CFO and How Can Your Business Benefit from Part-Time Expert Help?
Businesses that find themselves at a crossroads can benefit greatly from the expert guidance a Chief Financial Officer (CFO) can provide. However, committing to full-time help can often be more than a growing business may need.
Hiring a fractional CFO, a Chief Financial Officer who is available on a part-time basis, can help businesses leverage professional experience without shouldering the costs of a full-time hire.
We'll cover what a fractional CFO is, the services they offer, the benefits businesses can get from hiring one, and the differences between this fractional executive role and other accounting roles you may decide to hire for instead.
What is a Fractional CFO?
A fractional CFO is a Chief Financial Officer who is hired part-time to offer outsourced services to a growing business. This may include advice on strategic planning, finance, and other specialized expertise.
Part-time CFOs work with multiple companies, often up to full-time hours between all of them.
What Services Does a Fractional CFO Offer?
The services a fractional CFO offers can vary based on the business and its needs, but here are a few types of projects you may expect a fractional CFO to work on:
Financial strategy: Develop a financial strategy that supports business growth.
Risk management: Work to limit financial risks by identifying potential problem areas and creating strategies to avoid them.
IPOs and exit strategy: Determine the best strategy for selling the business or going public.
Fundraising: Creating pitch decks and financial models necessary for fundraising efforts. This may done for an expansion, a new service line offering, or an acquisition, for example.
Cash flow management: Ensure the business is optimizing its use of financial resources.
Market expansion: Ensure the business is maximizing its return on investment by researching markets and deciding where to offer products or services next.
Financial growth strategy: Use historic data, industry standards, and market information to decide on future business initiatives and projects.
Finance department management: Support the business by managing, hiring, and mentoring in-house finance and accounting personnel.
Most Common Problems that Fractional CFOs Help Solve
Financial complexity is no issue for a fractional CFO. These part-time executives help businesses solve problems related to improving profitability, forecasting finances, optimizing systems, and improving cash flow management.
If businesses are trying to figure out how to navigate their growth, raise more capital, or untangle a complex situation, bringing in a fractional CFO can be a helpful next step.
Key Benefits of Hiring a Fractional CFO
Businesses that hire a fractional CFO can benefit from the cost-effectiveness, expertise, flexibility, and focused attention a part-time employee like this can bring to organizational financial processes.
1. Cost-Effectiveness
With a fractional CFO, businesses are only paying for the time they need. This can cut down on expenses related to salary, benefits, and office space that may be required for a full-time Chief Financial Officer.
2. Expertise
Fractional CFOs possess high-level financial expertise and may also be well-versed in certain industries. You may decide to choose to work with one who specializes in a particular industry, or one with a greater familiarity of a certain geography or business size.
Businesses can also benefit from a third-party perspective. Sometimes, leadership in organizations can be too emotionally attached to the business to provide a truly objective view of the financial performance of the business.
Fractional CFOs have an outside, non-biased perspective that can help identify issues and opportunities that otherwise might be missed.
3. Flexible Role
Being nimble is the name of the game for a fractional CFO. The role can grow or shrink with your business needs.
Maybe you're taking on an ambitious initiative and need more of their time. It's easy to scale up and then reduce your reliance on their services once the project has passed.
4. Focused Attention on Your Financials
In the most basic sense, a fractional CFO's main role is to help you gain better control over your finances, forecasting, and budgeting. A part-time CFO can help you unearth data-driven insights that guide strategic choices, as well as identify and address potential financial risks.
5. Improved Investor Relations and Networking
After a fractional CFO helps you form a strong financial foundation, your business will have an easier time attracting investors.
This can also open the door to a wider network of professional connections, especially if the CFO has worked with a lot of other clients.
6. Improved Productivity
Most importantly, a fractional CFO can free up time that other members of leadership might have otherwise spent on financial tasks, opening up their time to projects that better align with their expertise.
Is a Fractional CFO the same as a CFO?
A fractional CFO and a CFO can take on the same kinds of tasks, but there's one key difference between them. Fractional CFOs are available to a business on a part-time basis. Chief Financial Officers are full-time hires who are dedicated to helping one business at a time.
What are the Differences Between a Controller and a Fractional CFO?
Controllers can also play a critical role in the financial management of a business, so you may be wondering what the difference is between a controller and a fractional or full-time CFO.
A controller generally fills the role of a financial operations manager. They are great at managing daily financial processes for a business.
A fractional CFO, on the other hand, goes further than this and serves as a strategic partner for the business. Part-time CFOs can provide high-level financial guidance that moves the company in a productive and profitable direction.
Differences Between a Fractional, Remote, and Interim CFO - Which is the Right CFO Model For You?
Outside of part-time and fractional, you may hear other terms for CFO commitment levels.
Interim CFOs are brought in for a short period but are often full-time. They take on the full range of CFO responsibilities and are focused on the immediate, urgent needs of the company. The ultimate goal with an interim CFO is to have a plan for them to leave the company after the short-term project is over.
A remote CFO can be interim or fractional depending on the specific needs of the client. They may even have a full-time role. The key difference with a remote CFO is that they don't come into the office to conduct their work. Instead, they collaborate and work on projects using cloud-based tools.
Fractional CFOs provide a portion of a CFO's services regularly. The goal with a fractional CFO can be to keep them on for many years or retain them until full-time help is necessary. However, these hires are more focused on long-term financial strategies compared to interim CFOs. They can also scale easily with the needs of the business.
Is Your Business Ready for Fractional CFO Help?
If you're not sure whether your business is ready for a fractional CFO, or if you're worried it won't provide adequate support, you may want to consider financial services in a few different stages, starting with bookkeepers and controllers and moving up to full-time CFOs.
When to Hire a Bookkeeper
A bookkeeper's core function involves recording transactions. It's a great role for a business that has simple financial needs and requires minimal financial support in the early stages.
When to Bring in a Controller
A controller oversees the daily financial operations of a business which may include accounting, tax, and reporting tasks. Businesses that have moved beyond the early stages and into more complex territory, but aren't looking to grow significantly in the next few years, might be best-suited to the services of a controller.
When to Bring in a Part-Time/Fractional CFO
Fractional CFOs provide strategic financial guidance to organizations, which can include analysis, financial planning, and risk management. Businesses on the verge of significant growth or facing a complex financial challenge can be helped tremendously by a part-time CFO.
When to Bring in a Full-Time CFO
Finally, there may come a time when a full-time hire makes the most sense. A full-time CFO is on hand every day of the week to lead the in-house finance team. This can include implementing key strategies, improving operations, and engaging in activities associated with team management.
Full-time CFOs are most useful to large, complex organizations that have significant financial needs that can't be fully addressed with part-time help.
Learn More About Fractional CFO Services at OAK Advisors CPAs
OAK Advisors CPAs offers fractional CFO services to businesses looking for additional support in a moment of transition. Whether you need help raising capital, improving in-house processes, or evaluating the feasibility of a shift in offerings, we can help. Reach out to our team of fractional CFOs today.
FAQs
Are fractional CFOs worth it?
Whether a fractional CFO is worth your resources will depend entirely on your business goals and how quickly you hope to achieve them. Oftentimes, it's easier to rationalize the expense involved with a fractional CFO compared to a full-time employee because it is a scalable role with a low-pressure commitment.
If you don't see the value in the fractional CFO you hire, it's easy to walk away and move in a different direction. The return you need to see from a CFO hired on a contractual basis is lower compared to a salaried employee.
How many hours does a fractional CFO work?
The number of hours a fractional CFO works depends entirely on what you need them to do.
Part-time/fractional CFOs can work anywhere from a few hours per week to a few hours per day. This can also grow or shrink depending on your business needs.
How much does a fractional CFO cost?
The cost of an experienced CFO can depend on a number of factors - the complexity of your business, the CFO role you want this part-time employee to fill, whether they charge an hourly rate or operate on a retainer basis, and so on.
In general, you can expect to pay a fraction of what a full-time CFO would cost. Because you are spending less, you open up more of your budget to additional initiatives.
What is the scope of work for a fractional CFO?
A fractional CFO services agreement will lay out the scope of work between them and your business. This can include financial planning and analysis, strategic financial guidance, operational finance tasks, and additional services like implementing new financial systems, negotiating contracts, or preparing reports for the board of directors. This will look different depending on the company.