Making the decision to bring in a fractional CFO can be a strategic growth move for both startups and early-stage companies. If your business is not in a financial place or at the level of complexity to fill a full-time CFO position, there are substantial benefits to looking into an outsourced option.
Let’s look more into the role of a fractional CFO and help determine if this can be a smart tactic for your organization.
What is a fractional CFO?
A fractional or an outsourced CFO is a person with CFO experience who helps organizations with their financial needs either part-time or on a fee/contract basis. The purpose of this position is different from an interim CFO, who is usually hired full-time for a period to fill the gap until a new CFO is employed on a fixed basis.
A fractional CFO has the same responsibilities as a full-time CFO. However, those responsibilities may vary from client to client, depending on their needs. An outsourced CFO can also do everything a full-time CFO does. A vital benefit of a fractional CFO can be strategy optimization by offering a numbers-driven perspective. In other words, a fractional CFO can evaluate your process and provide clarity for financially-sound business plans.
As startups and early-stage companies grow, their financial processes tend to become too complex for founders to manage with a single accountant. They need someone who can see the big picture through the details of financial reporting and accounting. In this case, a fractional CFO usually works on creating essential financial infrastructure and solving unique business challenges of the company.
When do companies hire a fractional CFO?
Most companies look at hiring a fractional CFO when they identify a strategic necessity their internal teams cannot meet. Usually, it is related to startups and early-stage companies because bringing in an outsourced CFO helps founders be more strategically focused from the onset. It also allows them to focus on other aspects of the growth.
If the business cannot afford (or does not have an ongoing need for) a full-time CFO at an early stage, fractional CFOs allow them to use their skills at specific points to drive results. Once fractional CFOs are on board, it is possible to tap into their expertise as needed to keep moving your company forward.
You may also consider hiring a fractional CFO if you have the following needs:
- Your business is expanding fast and needs help growing in a profitable and sustainable way.
- You have a knowledge gap, but not enough work or cash flow to justify hiring full-time.
- You need an expert to lay the foundation for creating financial systems to mitigate risk and ensure the right processes are in place.
- You need to replace a finance staff member who will be absent for an extended period or has left the company.
Why you should consider hiring a fractional CFO
A fractional CFO enables all businesses to receive the benefits of a larger organization. The company gets the added value of a highly ranked financial expert but on a fractional, affordable basis. Often these fractional contracts can last forever or until the organization grows enough to justify a full-time CFO.
Key benefits of hiring a fractional CFO include:
- Improved financial insight — precise and up-to-date financial reporting and management reports that include forecasts, actual results versus projections, cash flow projections and other KPIs that will enhance understanding and promote initiative-taking management. CFOs also tend to be the second most highly paid employees in an organization. A fractional CFO can improve financial information while being an affordable option for your budget.
- Advanced decision making — Basing decisions on accurate and up-to-date financial information allows the business owner to avoid making poor or costly decisions. Critical decisions include growth strategies, business financing, cost management and staffing.
- Stakeholder trust — Stakeholders usually respond positively when a professional CFO is part of the management team. This takes on additional importance when seeking outside investment, debt financing or positioning a company for sale.
- Productivity enhancement — Hiring a CFO to manage the financial and administrative functions of the business relieves the business owner to focus on running the business.
A fractional CFO has all the benefits of a full-time employee but at a lower cost. The vast benefits vary from more insightful reporting and decision making, more excellent business vision for planning and forecasting, and better fiscal management and control. Above all, the most significant benefit for owners and founders is the ability to shift the financial and administrative burden to the CFO and free themselves up to work on other parts of the business.
Are you considering an outsourced option for your financial insights? Anders CPAs + Advisors works with startups and entrepreneurs on their financial needs so they can focus on what they do best. Contact an Anders advisor to discuss your business needs and growth goals.
Every day at Anders, we serve as a catalyst for those striving to achieve their highest potential and carry this mentality on to our clients and community. Through a collaborative approach and a combination of tax, audit and advisory services, we help our clients achieve their goals.
As a principal and director of the outsourced CFO practice at Anders, Beth Schulte helps businesses gain a deeper understanding of their current and projected financial condition. She has over 30 years of experience providing high-level accounting and financial analysis to businesses from early-stage startups to large, publicly-traded companies.
