5 Benefits of a Fractional CFO
Fractional also known as Outsourced, Project or Part-time CFO
Hiring a CFO is a major milestone in the maturity and growth of a company. Finding the right operational financial executive can make all the difference in the rate of growth and the stability of a company. As a company grows, investing in sales, marketing, and operations is imperative, but an often-overlooked opportunity for growth is a Fractional CFO.
The CFO is the top financial executive of a company and has the overall responsibility for the financial management and activities of a company. Responsibilities include financial and business planning and strategies; revenue, expense and cash flow forecasting and tracking; analyzing and assessing risks, strengths, and weaknesses; capital-raising, mergers and acquisitions; and partner with all areas of a company to drive growth.
Most importantly your CFO should be a strategic partner, aligning a company’s business and financial strategy.
A Fractional CFO, often also referred to as an outsourced or part-time CFO provides a company with experienced financial and strategic guidance, typically at a lower cost than a full-time CFO employee of a company.
Beyond the cost of a full-time CFO, a Fractional CFO offers flexibility and experience, qualifications that are often out of reach for small and medium size businesses.
1 – Experience and expertise
Experience matters. Fractional CFOs have been full-time CFOs and are experienced at navigating a company’s growth. They bring not just years of experience but the expertise and perspective that comes from years of accumulated knowledge and experience.
Likely they have been through major transactions such as debt and equity financing, mergers and acquisitions, regulatory compliance and implementation of systems and internal controls bringing that experience with them.
Experienced Fractional CFOs can quickly assess, diagnose, and structure plans addressing a company’s needs and challenges, to provide more informed decisions.
2 – Strategic guidance
The true value a Fractional CFO comes from bringing their expertise to long-term planning, financial decisions and business decisions regarding growth management, cost control, investments and risk management which can only come from years of experience. CFOs have technical background but it’s the development of a long-term strategic perspective that contributes to better-informed decision.
3 – Flexibility
Fractional CFOs can serve companies in various ways. They can step in when there is a vacancy to fill in a full-time CFO role, providing leadership and stability during a transition. They can become a company’s first financial leadership as a company grows or can begin on a project basis filling needs such as budgeting, capital raising, planning, or improving financial processes and systems.
Fractional CFOs can grow with a company’s needs and provide needed guidance and expertise and can be flexible in terms of both scope of engagement and amount of time devoted to a company. Engagements can range from as much as full-time to as little as hours per month.
4 – Objectivity
A key factor that a Fractional CFO brings to the relationship is objectivity that comes from experience and one that comes from the freedom from internal politics and corporate ambitions. Clear-eyed, unbiased objectivity can better inform decisions and provide a wider range of perspectives and options.
5 – Cost Effectiveness
Since Fractional CFOs are hired on a part-time basis the costs are much lower than a full-time CFO. Fractional CFOs are typically paid as contractors so there is again savings on the typical employee overhead. Hiring a full-time CFO requires a commitment, total pay package but also in the time and cost to make a great hire.
The cost savings combined with the experience, expertise, strategic guidance, flexibility, and objectivity of a Fractional CFO can provide outsized valuable to a small and medium size businesses.
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