What’s a Fractional CFO? Does Your Business Need One?

When you start a business, you wear many hats. In fact, you may wear all the hats. Your expertise may be in a specific field, but you must also embrace every role involved in running a business — and that includes managing the finances.

Even if you aren’t a numbers person, you must manage cash flow, bookkeeping, budgeting, and forecasting all on your own — unless you have a fractional CFO.

What’s a Fractional CFO?

A fractional CFO, also referred to as an outsourced CFO, is someone who acts as a part-time chief financial officer for a business. A fractional CFO serves growing businesses that aren’t ready for a full-time financial manager. They perform the same functions as a chief financial officer but work through a retainer, part-time, or contract agreement instead of a full-time arrangement.

The Benefits of Having a Fractional CFO

The obvious benefit of having a fractional CFO is that business owners can take financial management off their plate and get the advice and expertise of an experienced CFO without paying a full-time team member.

Within that arrangement, a fractional CFO can:

Set up proper financial systems and reports
Instill systems and improve operations
Lead growth and boost profits
Help business owners get back to working on the things they love about their business

A fractional CFO can bring benefits to your business, but how do they actually do it?

What Does a Fractional CFO Do?

An outsourced CFO can help businesses in their finance department through a variety of services.

Create a financial strategy.

Many growing businesses build their financial framework as they go. (Imagine building a bus while it’s moving down the road.) They don’t have a clear strategy to guide their plans and react in real-time as things happen. A fractional CFO can help these businesses design a strategic financial plan with clear goals and the steps needed to reach them.

Interpret financial reporting.

In some cases, a growing business may have financial records and data — but no way to read or understand them. A fractional CFO can take financial reports and interpret them into actionable insights. Using their expertise, they can review your data to identify threats and weaknesses as well as opportunities and strengths.

Set up financial reporting.

Some early-stage businesses don’t even have financial reporting systems set up yet. A fractional CFO can establish the systems needed to develop accurate and useful reports that can share insights about your business operations and health.

Design a cash flow strategy.

Poor cash flow management is one of the primary reasons that businesses fail. Many growing companies get fixated on profit and fail to focus on expenses. A fractional CFO can help you avoid cash flow issues by helping you identify how much cash comes in and out of your business and by developing oversight into your cash runway.

Set up forecasting.

One of the reasons why businesses struggle with cash flow is because they don’t have accurate forecasting. Forecasting — the act of using historical data to predict future revenue and expenses — helps a business plan and account for the future. With the help of a fractional CFO, you can set up accurate forecasting that helps allocate budgets and expenses.

Create budgets.

Many businesses have a budget, but they don’t have the right budget to help them grow their business. A budget is more than a list of general, expected expenses. A budget should consider the goals for your business and what you will need to get there. A fractional CFO helps you gain the foresight you need to develop a growth-minded business budget that grows and evolves with your business.

Aid in raising capital.

Many growing businesses hit a point where they are ready to raise capital either through loans or venture capital. When they enter this phase, they need clear financial reports that show bankers and investors why and how their business is a good investment. A fractional CFO can help you put together financial data that tells the story of where your business is and where it is going, increasing your chances of raising capital.

Manage mergers and acquisitions.

Growth stage businesses may also find themselves at a point where they are ready to expand by purchasing another company. Mergers and acquisitions require lengthy financial reporting and reconciliation. A fractional CFO can guide you through this process and create the documentation you need. They can also review the documents from the company you’re buying to share pros and cons and ensure that everything in the deal is within your best financial interest.

Is It Time For Your Business to Hire a Fractional CFO?

New businesses often can’t afford a CFO right off the bat. Owners work to run every department of the business, even with limited expertise. This works for a while, but it usually doesn’t work forever.

At some point, a growing business needs assistance with financial tasks if they want to accelerate their growth, increase profits, and reach their goals.

If your business is in a growth-stage, a fractional CFO can help you get the financial insights and oversight needed to take your organization to the next level.

If this sounds like your business, CFO2U is here to help. Find out if it’s time for your growth- or early-stage company to bring on a part-time financial support team. Schedule a discovery call with our team to see how we can elevate your business financials.

Author
Recent Posts

Susan Nieland

Susan is a CPA, financial executive, and founder of CFO2U. A former member of the U.S. Air Force, Susan has a 20+ year track record of serving small to mid-size growth companies, both publicly traded and privately held. She has a sense of humor and positive outlook on life and enjoys looking for creative ways to solve every day challenges in finance and accounting.

What’s a Fractional CFO? Does Your Business Need One?