Less than one-third of businesses survive 10 years after their founding. In around 80 percent of cases, business failure stems directly from financial problems.
Fatal financial problems run the gamut from poor cash flow to unsustainable growth strategies. In every case, having an experienced Chief Financial Officer (CFO) on board can help. But for many companies and not-for-profit organizations, hiring a full-time just isn’t in the budget.
That’s where a fractional CFO can make all the difference. Here’s what you need to know about this powerful business trend.
What Is a Fractional CFO?
A fractional CFO is an experienced financial professional who provides CFO services to an organization on a part-time or contract basis. Another common term for this arrangement is “Outsourced CFO.”
Fractional CFOs can deliver all the same services that organizations expect from in-house CFOs, such as:
- Payroll support
- Implementation, evaluation, and oversight of cash management systems and tools
- Raising capital
- Guiding organization growth
- Leading organizations through financial challenges or crises
- Strategy development
- Navigating audits or new contract negotiations
- Making finance-related personnel decisions
Unlike traditional CFOs, fractional ones perform these duties in small chunks of time on an as-needed basis. Their work schedules reflect organizational needs.
For example, they may work 20 or more hours per week for a few weeks to help an organization complete a deal or resolve a financial crisis. Or they might work one day per month, reviewing company finances and compiling key reports. Each situation is different and can be customized to company needs.
Fractional CFOs should not be confused with interim CFOs. Interim CFOs work for an organization full-time for a short period while the organization seeks to hire a new full-time person for that position.
The Benefits of Hiring a Fractional CFO
The benefits of hiring a fractional CFO are enormous. They go far beyond the basic conveniences organizations might expect from contracting out for virtual accounting services. Here are the top four.
1. Access to a Financial Professional With Broad Experience
Traditionally, companies chose CFOs for their excellence in routine accounting services and preventing tax problems.
Today’s companies are more likely to need financial professionals adept in:
- Human resource management
- Information technology
- Risk management
Finding someone with the right background and experience can be challenging. Hiring them can be expensive.
Often, companies couldn’t afford to hire someone with the right experience even if they knew exactly what they wanted – which many don’t.
Fractional CFOs tend to have a breadth and depth of experience that traditional CFOs do not. This enables them to bring creative outsider perspectives to an organization. That increases problem-solving and innovation.
The contract nature of the hiring arrangement puts these talented professionals within reach of organizations that would never be able to afford a full-time person with equivalent experience.
2. Ability to Align Budgets and Growth
Many companies that start off strong begin to flounder when they try to scale up their growth. This is true regardless of what form that growth takes. Entrepreneurs may struggle to understand or accurately forecast the full range and duration of the expenses they will face during each phase of growth.
A fractional CFO can help companies:
- Chart their growth
- Anticipate expenses
- Identify and implement smart growth strategies and tools
Best of all, they can do this without saddling the company with the hefty costs of a full-time, highly-experienced CFO. This enables companies to grow at their own pace and to keep their expenses in line with that growth.
3. Improve Education and Communication
Hiring an outsourced CFO allows companies to avoid traditional pitfalls such as departmental silo-ing.
Full-time CFOs can fall into the trap of focusing on their own private targets or priorities. Fractional CFOs work cooperatively with other company leaders to achieve company goals, instead.
Outsourced CFOs can also be great educators. They can help other company leaders understand the interplay between their jobs and company finances. This can build strong habits and communication around money within the company.
Fractional CFOs often play a critical role in helping companies determine what they need in a full-time CFO, as well. They can help company executives identify:
- What skills and background the company most needs in CFO
- What type of personality, communication style, or financial approach is the best fit for the rest of the management team
- What skills and job responsibilities they may want to assign to other roles so that their future CFO can focus on priority projects
All of this powerfully informs future business decisions.
4. Improve Stakeholder Relationships
Financial management is understandably a key concern for stakeholders in any organization. Potential stakeholders and partners often hesitate to get involved with companies that cannot demonstrate strong financial leadership.
Hiring a Sarasota tax accountant to ensure that organizational books are above board can be a good step but it may not be enough. Hiring a fractional CFO, on the other hand, sends a powerful message.
Seeing an experienced financial professional at the helm gives stakeholders confidence. CFOs can:
- Provide the reports and accountability organizations didn’t know they needed
- Prevent costly financial errors
- Help organizations realize their projected growth
- Demonstrate to stakeholders that appropriate best practices are in place
- Show stakeholders that organizations are using the latest and smartest tools and resources available
All of this gives stakeholders and prospective partners peace of mind. It improves public trust and perception of an organization, fueling future success.
How to Know if a Fractional CFO Is Right for Your Business
Fractional CFO services can be suitable for any size or type of business or organization. They can be particularly valuable if you:
- Are facing Sarasota tax problems or another financial crisis
- Want to explore the benefits of a virtual accounting service
- Need emergency help sorting out financial concerns
- Need short-term financial help managing a specific project, contract, or campaign
- Are facing big decisions related to financial management, tools, practices, or policies
Hiring a fractional CFO can be a smart choice even if an organization already employs a full-time CFO.
No CFO can have experience in every possible skill or situation. Even organizations with great CFOs can find themselves in need of advice and support.
Fractional CFOs are a perfect way to get that support. They can partner with full-time CFOs to work through challenging or unique situations. Or they can step in to handle specific short-term projects when organizations lack enough in-house resources to handle them alone.
For all these reasons and more, a fractional CFO can be the best accountant your organization could ever hope to work with.
Schedule an appointment today to learn more about what a fractional CFO and other virtual accounting services can offer your organization. Let our experienced team help you find the solutions that are right for your business.