Whether you’re planning to sell your business, fundraising, or make an acquisition, getting your financials in order is one of the most important steps you can take. The process of due diligence helps all parties understand the real condition of a business before any money changes hands.
But who leads that process when you’re short on time, or your internal finance team is already stretched thin? Fractional CFOs step in to support critical financial planning and work, especially during high-stakes situations, such as due diligence.
In this blog, we’ll break down what due diligence support involves, how Fractional CFOs support it, and why many companies rely on them during major transactions.
What Is Due Diligence?
Due diligence is the process of reviewing a business’s financial and operational details before a transaction. Investors, buyers, and lenders all use this step to make sure what’s being promised lines up with reality.
It’s also typically part of major business events, such as mergers and acquisitions, raising venture capital or private equity funding, preparing for a sale or exit, or conducting internal audits and restructuring efforts.
The main goals are:
- Confirming financial performance
- Identifying risks or liabilities
- Understanding the true value of the business
- Making sure records are reliable and easy to follow
How Fractional CFOs Deliver Due Diligence Support Services
A Fractional CFO is someone who helps during due diligence because they can bring an outside perspective. Here’s what they typically do during this process:
Financial Statement Analysis
Fractional CFOs carefully review:
- Income statements
- Balance sheets
- Cash flow reports
They look for anything that seems off, like revenue that’s growing too quickly without support, or expenses that don’t match the company’s operations. Their goal is to confirm that the financial reports accurately reflect the business’s actual performance.
Forecast Validation and Scenario Planning
Future projections play a significant role in any transaction. A Fractional CFO will review the company’s forecasts to see if they make sense based on past performance and market conditions.
They may also build out different scenarios to test how the business might perform under various circumstances, helping both the company and the buyer or investor understand potential risks and opportunities.
Quality of Earnings (QoE) Reviews
A Quality of Earnings review distinguishes between ongoing, reliable income and one-time events. For example:
- Was there a major contract that won’t be renewed?
- Are some of the profits from cutting one-time costs?
Fractional CFOs also adjust for things like interest, taxes, and depreciation to give a clearer view of operating income (often called EBITDA).
Working Capital & Debt Analysis
Healthy working capital and manageable debt are key signs of financial stability. A Fractional CFO will assess the business’s working capital needs to operate smoothly, review debt terms, and identify any unusual factors, like off-balance-sheet liabilities or risky loan covenants, that could impact the deal.
Internal Controls and Compliance Check
Strong internal controls help ensure accurate financial reporting. A Fractional CFO will assess the company’s accounting practices, look at how financial data is handled, and check whether the right checks and balances are in place. If there are any gaps, they’ll suggest improvements to reduce risk and support better decision-making going forward.
5 Benefits of Fractional CFOs in Due Diligence Engagements
There are many benefits of a Fractional CFO, but how do those benefits apply during due diligence support? Here’s where their support makes a real difference.
1. Objective Third-Party Financial Insight
A Fractional CFO brings a fresh, unbiased perspective to your financials. They’re not tied to internal assumptions, so they can spot gaps or risks that others may overlook. This level of clarity helps build trust with buyers, lenders, and investors. It also gives leadership a more realistic view of the company’s financial position.
2. Scalable Expertise Without Long-Term Overhead
You get CFO-level insight without the long-term commitment. This makes it easier for growing companies or lean teams to access deep financial expertise during busy or high-stakes periods. The support is focused, flexible, and tailored to your needs. You only pay for what you actually use.
3. Rapid Deployment During Time-Sensitive Deals
Deals move quickly, and delays can be costly. Fractional CFOs are accustomed to jumping in, sorting through complex data, and managing requests under pressure. They help keep things on track by staying organized and focused. This saves your internal team from getting overwhelmed.
4. Cross-Industry Knowledge and Deal Experience
Most Fractional CFOs have experience working with a diverse range of companies and deal types. Whether it’s a venture round, acquisition, or sale, they’ve likely seen something similar before. That kind of perspective, shaped by direct experience handling CFO responsibilities, helps them know what to expect and how to handle challenges as they come up.
5. Coordination With Legal and Advisory Teams
Due diligence and transaction support involve more than finance; they also include legal and tax teams. A Fractional CFO helps tie all these pieces together, making sure financial data is aligned with what the rest of the deal team needs. They handle document requests, clarify numbers, and reduce miscommunication. This makes the whole process smoother and less stressful for everyone involved.
When to Engage a Fractional CFO for Due Diligence Support
There are several points during a deal, or even before one begins, when bringing in a Fractional CFO in due diligence support makes sense.
Pre-Transaction Planning
If you’re considering a sale or preparing to raise capital, it’s a smart time to hire a Fractional CFO. They can clean up your financial statements, organize documentation, and address any reporting gaps that could raise questions later. This groundwork helps you present your business in the best possible light when talks begin.
During Active Deal Negotiations
Once conversations are underway with buyers or investors, things can move quickly. A Fractional CFO supports your team by reviewing financial data shared externally, answering follow-up questions, and helping validate the assumptions behind your company’s valuation. Their involvement can help negotiations stay focused and credible.
After a Term Sheet or Letter of Intent
This is a key moment when speed and accuracy matter. A Fractional CFO can step in to lead the financial aspect of due diligence, coordinate closely with legal and tax advisors, and ensure that all requested documents and disclosures are handled in a timely manner. Their support helps keep the deal moving forward without delays.
During Internal Audits or Strategic Pivots
Even outside of a deal, Fractional CFOs can provide valuable support when your company is facing a significant shift. They’re often brought in during:
- Internal audits
- Budget restructuring
- Strategic planning efforts
Their fresh perspective helps identify financial risks and missed opportunities, providing leadership with clearer data for informed decision-making.
How to Find the Right Fractional CFO for Due Diligence Support
When you’re looking for help, here are some things to look for:
- Experience: Choose someone who has worked on mergers, acquisitions, or funding rounds. Bonus points if they’ve worked with VC-backed companies. This will help you know that they’re familiar with the pressures and details that come with deal-making.
- Industry knowledge: Someone who understands your specific sector will spot risks that others might miss. Their insight, aside from your financial knowledge as a CEO, helps tailor the due diligence process to what matters most in your market.
- References and outcomes: Ask about past work. What kinds of deals have they supported? What problems did they help solve? Hearing real examples will show how they handle challenges and deliver results.
- Working style: Make sure expectations are clear, and being on the same page from the start keeps the process smooth and avoids surprises later. Agree on:
- Timeline
- Deliverables
- Communication habits
Get Due Diligence Support From a Fractional CFO Now
If you’re preparing for a deal or reviewing your financials, Fractional CFOs can provide focused, flexible support. They bring experience in handling transactions, organizing reports, and making sure your numbers are accurate and easy to explain.
You don’t need to commit to a full-time hire to get this kind of help. They work with your team when needed, keep the process moving, and bring calm, experienced guidance to a high-pressure situation. Explore our Fractional CFO services today to learn more.
Due Diligence Support FAQs
Here are some of the commonly asked questions about due diligence support and Fractional CFOs:
How can Fractional CFOs improve post-due diligence integration?
They help monitor financial performance and facilitate smoother handoffs after a deal is closed. Their involvement keeps things organized and reduces the risk of missing details.
What are the common challenges Fractional CFOs face in due diligence support?
Limited access to internal data or unclear documentation can hinder progress. They work around this by asking targeted questions and focusing on what matters most to the deal.
Can they help early-stage startups?
Yes, they often work with early-stage companies to clean up financials, build models, and prepare materials for investors. Their support helps startups present more clearly and respond to questions with confidence.
Do they provide guidance or simply complete the work?
Fractional CFOs combine planning with execution, and they don’t just give recommendations and walk away. They work alongside your team to build reports, answer questions, and keep things moving.