What is a fractional CFO?
What, exactly, is a fractional chief executive officer? They are an experienced CFO who works with organizations in an outsourced, part-time, retainer, or contract arrangement. This provides a company with the experience and expertise of a C-level finance executive without the in-house cost—salary, benefits, and more—of a full-time employed CFO.
Small to mid-sized business owners certainly know the importance of having employees dedicated to providing financial reports, insight and business strategy. It is also typically the case that these companies do not have the resources to employ a full-time, dedicated C-level finance executive. Most growing enterprises do not need a full-time CFO as part of their staff at this point. Yet, most companies need supplemental assistance in overseeing the manifold of financial aspects of their business. In this scenario, a fractional CFO can be an invaluable asset to a company.
How can our fractional CFOs help your business achieve its financial goals?
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Fractional CFO versus traditional CFO
The fractional CFO is an outsourced chief financial officer whose duties and pay can be more easily scaled than a full-time, in-house CFO. A traditional CFO role would by definition include heavy involvement in determining the long-term goals and strategic decisions of a company. A fractional CFO, while also involved in steering the company in the right direction, would function in a more consultative role.
A full-time CFO generally manages and provides all general financial strategy. An interim CFO performs CFO duties before or between hiring a new CFO. A fractional CFO’s typically works on a project basis and tends to be specifically focused on a particular challenge or goals at a company.
Duties of a fractional CFO
Fractional CFOs perform many duties related to the protection of the financial well-being of a company. They focus on helping a company in three main capacities. One is to work through financial challenges. Another is to attain forward facing financial support. This includes facilitating business growth, partaking in business planning and implementing financial systems. The last is helping companies to achieve their business goals. This often involves raising capital and preparing for a business audit, merger or acquisition.
Some services that they may provide to a company include:
• Expert Financial Strategy
• Short- & Long-Term Forecasting
• Raising Capital
• Systems Strategy & Design
• Expanding Products, Services, or Geographies
• Optimizing Cash Flow
• Maximizing Margins
• Interim CFO Services
• Accelerating Sustainable Growth
• Mergers & Acquisitions
• Preparing for an Exit
Fractional CFOs have to be versatile in their skill set and have experience in a number of different fields.
Benefits of a fractional CFO
What are some benefits that fractional CFOs can bring to small or medium-sized growing enterprises? There are several potential advantages to consider.
The first, and perhaps most obvious advantage is revealed by comparing the average yearly salary of a traditional, full-time CFO with the average salary of a part-time, or fractional CFO. A fractional CFO costs roughly $200,000 less every year than a full-time CFO, and that does not necessarily include benefits or perquisites.
Secondly, the duties of fractional CFOs are much easier to scale up or down according to the business need. In a busy part of the fiscal year, a business owner may have them heavily involved in financial planning and oversight, whereas in slower parts of the year this level of interaction may be unnecessary. This ability to adjust as needed offers a big advantage over a traditional CFO.
An outsourced CFO can provide an outsider's perspective on the company's financial health, short-term decisions, and long-term strategies. In many companies, this is sorely needed. An in-house CFO may easily become complacent, favor certain internal or external relationships above the company's interests, and be biased in preferences on strategy. A fractional CFO on the other hand, is less influenced by office politics and culture. They can provide a fresh, clear perspective on matters.
How a fractional CFO can work with your team
There are many ways a fractional CFO can work alongside a company's currently existing financial team. If a hierarchy of financial officers is already in place at a company, (for example, the company already employs a CFO, CPA, bookkeeper, or other accounting employees), then a fractional CFO would function largely as a consultant and fellow strategist. However, if that infrastructure is not in place, then a fractional CFO, along with other outsourced accounting professionals, can fulfill all of those duties as well, depending on the need.