You’ve heard of a CFO, but what about a fractional CFO? What do they do? Better yet, how can a fractional CFO benefit your business? We will answer these questions in today's post, along with why you should consider hiring a fractional CFO.
A fractional CFO is a highly experienced financial manager who provides strategic advice and guidance to businesses on an as-needed basis.
Unlike a typical CFO, fractional CFOs do not work full-time for your organization. Instead, they work as an outside consultant who provides the same level of expertise and insight as a full-time CFO but without the commitment of a full-time regular employee.
Fractional CFOs are ideal for small businesses or startups that need financial guidance but don't have the resources (or budget) to hire an in-house CFO.
This is another question many businesses have about fractional CFOs. The short answer is no; fractional and full-time CFOs offer different services.
Fractional CFOs provide occasional advice or help to businesses without or who cannot afford a full-time CFO's expertise. They're often brought in as part of an advisory board or when major decisions need to be made.
For example, a fractional CFO might help with fundraising efforts, guiding applications for financing products like venture capital or angel investments.
Full-time CFOs, however, are more involved in the business's day-to-day operations and provide ongoing financial oversight and management. They are integral to setting long-term strategies and developing key performance metrics that ensure the company meets its financial goals.
The most significant difference between fractional and full-time CFOs is the former is more of a consultant, while the latter has a larger role in the management of your business.
(We also talk about the differences between a bookkeeper and an accountant here)
Both can serve important purposes and provide different advantages to the company that hires them.
On that note, let's talk more about the benefits of hiring a fractional CFO for your business.
Here are six key benefits of hiring a fractional CFO:
A fractional CFO provides invaluable advice and guidance on financial decisions, helping you make the most of your resources.
With a fractional CFO, you can be confident all financial tasks will be completed promptly, freeing up time for other essential tasks.
Your fractional CFO will help identify areas of improvement and ensure all financial processes are running smoothly and efficiently.
You can't discuss the benefits of fractional CFOs without mentioning cost-savings in the discussion: you pay only for the services you need without committing to a full-time salary or benefits package as with an in-house CFO.
A highly experienced fractional CFO offers advice on complex financial issues, helping you make the best decisions for your business. For example, they can guide you through mergers, acquisitions, and other complex financial transactions.
Finally, with this role filled in your business, it's easy to scale up or down depending on what suits at that moment. In turn, you can adjust how much help you need without having to commit to a full-time employee. Not to mention, this flexibility makes it easier to adjust your budget accordingly.
Now let's dig a little more into fractional CFOs' specific roles and responsibilities.
A fractional CFO will help manage financial processes, including budgeting, forecasting, and cash flow management. They also provide strategic advice on investments, fundraising, and other finance-related concerns. Further, they can develop plans to reduce costs, increase profits, and advise on how best to use capital most effectively.
They can help you raise capital if needed by helping you create solid business plans or find the right investors for your venture. This can be a tricky process, so having the expertise of a fractional CFO on your side is invaluable.
Let's say you need to set up a new accounting system. A fractional CFO can help with that, too, ensuring all your financial processes are running smoothly and efficiently.
That's just one example of the systems your fractional CFO can implement. Others include financial reporting systems, payroll, and treasury management.
(We cover more benefits of hiring a CFO consultant here)
Last but not least, fractional CFOs give you the confidence your business meets all legal and regulatory requirements, protecting you from potential liabilities or legal issues down the line.
This can be particularly beneficial when you're navigating audits or transactions requiring compliance paperwork. A fractional CFO helps you stay abreast of new regulations and ensure all documents are in order.
Speaking of audits, check out this post next to learn about being audit-proof.
Now that you know the difference between a full-time CFO and a fractional alternative and the benefits and other details of this role, you're ready to decide what's best for your company.
If a fractional CFO suits your business best, contact Two Roads today to learn more about our CFO advisory services.
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