Business owners often look at the basic numbers to know how they are doing. What are the operating expenses? How are the sales? How much profit did we make last month? But most of the time, they are unable to use those statistics to grow their business, improve sales or make plans for the future.
That is what CFO’s are for. But if you are a small business, you might not be able to afford one. Enter fractional CFO — an experienced chief financial officer who is hired to work for your company on a part-time basis. The CFO can work for your company as a freelancer, logging in as few as 10 hours a month, or more depending on your need.
But what would this CFO bring to the company? Let’s take a deeper look at the functions of a CFO and how you can hire one to improve the financial health of your company.
What Is A Fractional CFO?
Fractional CFOs are experienced individuals who work with companies on a project-to-project or an hourly basis. Their duties can be broad or specific, depending on your need. If a business feels like its team is not skilled enough to solve the company’s problems, it can hire an experienced fractional CFO to assist them with special projects. A few of their responsibilities include:
- Managing financial reporting
- Mentoring your accounting department
- Managing budgets
- Plan and execute strategic planning with the stakeholders
- Equity and debt fundraising logistics
- IPO preparation
- Audit preparation
- Improving internal controls and technical accounting procedures
- Evaluating contracts and negotiating with banks, vendors, and customers
- Improve bookkeeping practices
- Cash flow management
How Does A Fractional CFO Work?
A fractional CFO is an outsider who is brought into the business to help you overcome a special challenge. Let’s say your company is facing a hard time in generating steady cash flow, or your bookkeeping practices are out of date, or you just need to raise more capital.
Hiring a fractional CFO will allow you to overcome these challenges, without actually hiring a full-time CFO. Small businesses can save themselves a lot of money by getting one for just a few hours a month — because not every business can afford the high salaries that are often associated with full-time CFOs.
Do not confuse a fractional CFO with an interim CFO. An interim CFO is someone that may be brought on board in order to become a permanent one later. But a fractional CFO will log in the hours, complete their assigned task and leave.
If you enjoy collaborating with your fractional CFO, this relationship can continue for years. Your part-time CFO will provide everything from strategic planning to financial expertise. Or it could be just a one-time thing.
8 Reasons Why You Need To Hire A Fractional CFO
1. Better Financial Information
Your CFO can help produce accurate financial statements as well as management reports that include projections, actual results versus forecasts, and cash flow forecasts. They can point out other KPIs that can help your account department with their management.
2. Better Decision-Making
A fractional CFO can help you make decisions with the help of accurate and relevant financial information that will help you navigate through poor decisions or costly mistakes. These decisions can be related to cost management, cash flow management, growth strategies, financial investments and hiring procedures.
3. Special Skills
Your fractional CFO is going to be a business professional bringing years of experience with different businesses. The fractional CFO would have experience handling a diverse range of businesses and clients. Hiring such an experienced individual will drastically improve the working of your business.
4. Improved Internal Controls
Financial controls will help you improve control of your company’s assets, increase the accuracy of your financial statements and increase financial visibility. Moreover, a fresh set of eyes can help your team in mitigating errors or chances of fraud.
5. Enhanced Productivity
Your fractional CFO will handle all financial and administrative functions of the business, allowing you to have more time to focus on the business aspect of your company. A CFO is well equipped to deal with areas other than the financial department, such as human resources, insurances, legal, IT, PR, marketing, and other facilities.
6. Specialized Knowledge
An upside of hiring a fractional CFO is that most of them focus on a specific industry. They have sophisticated knowledge and industry relationships that you might not have. Bringing a freelance CFO on board can help you maneuver through areas which you might not have access to, or simply could not afford to before.
7. Staff Mentoring
One of the biggest benefits of hiring a fractional CFO is that their years of experience make them great mentors and trainers. A big chunk of fractional CFOs seek out positions where they can help develop teams or train the current ones into improving their operations and upgrading their capabilities.
A fractional CFO hourly rate can cost you from $175 to $300 per hour. The benefits a fractional CFO can bring to your company are huge in terms of skills and knowledge. If you were to hire a full-time CFO, paying their salary, benefits and perks can cost significantly more.
How To Choose A Fractional CFO
Before you choose your fractional CFO, you have to consider a few things. First and foremost is experience. If your CFO has experience in your relevant industry, has generated the desired results for past clients, and has the relevant qualifications, then you can consider them.
Moreover, you should look into other details such as raising capital, selling a company, a successful IPO, startup experience, etc.
Lastly, focus on their personality. Ask yourself a few questions before making the final decision. Are they good at communication? Will they match your pace? Can they commit to your company? If you choose to hire them, will they make you a high priority? And are they right for your existing teams?
Complete the above checklist to ensure a smooth onboarding process.
What’s It Like Working With A Fractional CFO? The Bottom Line
To summarize, a Fractional CFO brings all the benefits of an actual CFO. They cost far less and work for an agreed-upon time on an ongoing basis.
The benefits are numerous, ranging from improved financial management, planning, forecasting, staff training, and better controls. We believe that a fractional CFO can allow owners to share the burden, which is the biggest benefit of all. Business owners can focus on the business aspect better when their finances and administrative functions are being handled by an expert.
We hope that you enjoyed reading this article. If you have any questions for us, send us an email at firstname.lastname@example.org