When should you consider hiring a fractional CFO ?

A fractional or as it is also called, an outsourced CFO (CFO) is a person with CFO experience who assists organizations with their financial tasks on a part-time basis, either on a fee basis or usually on a contract basis. This is different from an interim CFO, who is usually hired full-time for a period of time to fill the gap until the position is hired on a fixed basis.

What does a fractional CFO do?

A fractional CFO has basically the same duties as a full-time CFO. However, those duties may vary from client to client, depending on what they require at the time. Practically everything a full-time CFO does can also be done by an outsourced CFO. So, typical strategic tasks of fractional CFO can be strategy optimization, which means that CFOs can contribute to the financial side of the strategy by providing a numbers-driven perspective.  In other words, a fractional CFO can test your strategy and provide clarity for financially sound plans. As the primary role of the CFO, it is the financial side of the company. As startups grow, their financial processes become too complex for founders to handle with just an accountant. They need someone who can see the big picture through the nuts and bolts of financial reporting and accounting. In this case, a fractional CFO usually works on creating essential financial infrastructure and solving specific financial challenges of the company.

When do companies hire a fractional CFO? 

Most companies look at hiring a fractional CFO when they identify a strategic necessity that their internal teams can't meet. Usually it is related to start-ups, because hiring an outsourced CFO for startups early on helps founders be more financially focused from the onset. It also allows them to focus on other aspects of the business for growth. If at an early stage they can't afford (or simply don't have an ongoing need for) a full-time CFO, fractional CFOs allow them to use their skills at certain points to drive results.  And once part-time CFOs are on board, it is possible to tap into their expertise as needed to keep moving your company forward. 

You may also consider hiring a fractional CFO if you have the following needs:

  1. Your business is expanding exponentially and needs help growing profitably and sustainably. 
  2. You have a knowledge gap, but not enough work or cash flow to justify hiring full-time.
  3. You need an expert to lay the groundwork for building financial systems to mitigate risk and ensure the right processes are in place from the start.
  4. You need to replace a finance staff member who will be absent for an extended period of time, such as maternity or sabbatical leave.

Why you should consider hiring a fractional CFO

A fractional CFO enables all businesses to receive the benefits of a larger organization. The enterprise gets the benefits of a highly ranked financial expert, but on a fractional, affordable basis. Often these fractional contracts can last forever or until the organization grows enough to justify a full-time CFO. 

Key benefits of hiring a fractional CFO include:

  1. Improved financial information - precise and up-to-date financial reporting and management reports that include forecasts, actual results vs. projections, cash flow projections and other KPIs that improve understanding and promote proactive management. It has to be noticed as well, that CFOs tend to be the second most highly paid employees in an organization. Due to this, fractional CFO can improve financial information affordable for your budget.

  2. Advanced Decision Making - Basing decisions on accurate and up-to-date financial information allows the business owner to avoid making poor or costly decisions. Key decisions include growth strategies, business financing, cost management and staffing.

  3. Stakeholder Trust - Stakeholders usually respond positively to the knowledge that a professional CFO is part of the management team. This takes on additional importance when seeking outside investment, debt financing or positioning a company for sale.  

  4. Productivity Enhancement - Hiring a CFO to handle the financial and administrative functions of the business relieves the business owner to focus on running the business.

 

To sum up, a fractional CFO has all the benefits of a full-time employee, but at a lower cost. The benefits, of which there are many, vary from better reporting and decision making, better business vision for planning and forecasting, and better financial management and control. But the biggest benefit is the owner's ability to shift the financial and administrative burden to the CFO and free themselves up to work on other parts of the business.

And while all benefits of hiring a fractional CFO are listed, there is also to remember, that 

for having great financial management, companies need to implement digital tools. With the help of a robust spend management solution, software CFOs can gain valuable insight into spending across the organization to help them gain visibility into the changing levers behind CAC and other important KPIs and make sound decisions based on spend data.

If you want to know more about Jenji expense management solution, do not hesitate to contact our team at jenji@sales.io. We are happy to answer all your questions!

Geetika Raman