What are the Benefits of a Fractional CFO?
What are the Benefits of a Fractional CFO?
Growing and evolving businesses depend heavily on guidance from its top executives. However, small businesses don’t always start out with a Chief Financial Officer (CFO) on payroll. For many companies, the benefits of a Fractional CFO include filling financial leadership gaps without a full-time salary.
What Does a Fractional CFO Do?
A Fractional CFO is an experienced CFO who works with more than one company. They are not a full-time employee but rather work under a part-time contract or retainer agreement.
The benefits of a Fractional CFO include fulfilling the role of a traditional CFO without the expense and overhead of a full-time executive. Fractional CFOs helps companies complete high-level financial tasks like:
✓ Addressing Cash Flow Issues
✓ Establishing Budgets
✓ Managing Expenses
✓ Navigating Audits
✓ Developing Financial Forecasts
✓ Analyzing markets or customer segments
✓ Integrating new systems
✓ Improving profit margins
Benefits of a Fractional CFO
Small to medium sized businesses considering a full-time C-suite executive may not realize there are part-time or “fractional” options. He are the top benefits of a Fractional CFO:
Enables a High-Levels Part-Time Hire
Hiring part-time for entry-level jobs is common practice, but hiring C-suite level professionals on a part-time basis is often difficult. A Fractional CFO, while part-time to the client, is employed full-time by the outsourcing firm. Securing top-notch talent becomes much easier.
Many companies need high-level guidance, but don’t have enough work for a full-time CFO. Other companies want to use a CFO hire to get back on track but don’t have the need for a long-term executive in that role. By hiring a Fractional, or part-time, CFO, these companies can get the high-level talent they need when they need it.
Benefits of a Fractional CFO Include a Lower Cost
Fractional CFOs are more affordable than an in-house CFO. Companies may bring in a CFO for a specific need. For example, to prepare for an acquisition or raise extra capital. Because the company doesn’t have to pay a full-time salary or provide benefits or bonuses to a Fractional CFO, costs are greatly reduced.
Brings Financial Expertise
The financial success of a business requires strategy and transparency. A CFO brings to the table an expert understanding of financial goal setting, expense organization and budgeting. One of the benefits of a Fractional CFO is extensive knowledge gained by working with many different companies. Fractional CFOs are skilled at building strategies and predicting financial forecasts.
Because of this financial expertise, a widely used benefit of a Fractional CFO includes finding solutions to specific challenges. For example, a company may bring in a temporary CFO to solve a particular issue (like a cash flow problem) that their existing team can’t handle.
Invaluable for Transition Periods
If a small company is preparing for a sale or audit, the benefits of a Fractional CFO are huge. For example, companies can bring in Fractional CFOs to make sure that the books are accurate and complete, and that their budgets are realistic and on track. A Fractional CFO offers hands-on guidance and may help raise capital to give an edge with an incoming investor. In addition, transitioning companies benefit from experienced leadership and an outside perspective.
Fractional CFOs serve as indispensable guides for companies transitioning in size or pivoting in strategy. They can offer experienced support by:
✓ Integrating new tools
✓ Reinventing bookkeeping processes
✓ Adapting to regulatory demands
✓ Building new vendor relationships
✓ Creating scalable financial infrastructure
Companies in a state of growth often need a higher level of financial leadership. A huge benefit of a Fractional CFO is how they “bridge the chasm,” working with company executives to help grow the company.
Supports Sustainable Growth
Growing too quickly can cause major problems for a transitioning business. A Fractional CFO can provide affordable expert-level guidance to avoid these problems. One of the benefits of a Fractional CFO is an understanding of market direction and industry best practices which is critical to assessing whether the growth is sustainable.