Chief financial officers (CFO) can be a valuable asset to a growing business. They leverage their financial expertise and industry experience to help companies optimize their current operations and create sustainable growth strategies.
However, small businesses and startups may not have the resources or workload to justify hiring a full-time CFO.
Having a financial expert on your team can make a significant difference in the success of your company. A fractional CFO can provide part-time financial services to your business, offering expertise and guidance without the commitment of a full-time employee.
This post explores the advantages of hiring a fractional CFO, when to consider this option over a full-time CFO, and how fractional CFOs can leverage financial automation to streamline processes and drive growth.
What is a fractional CFO?
A fractional CFO, sometimes called a part-time CFO, is a professional that companies hire to provide strategic guidance and financial advice.
Fractional CFOs are contracted on a part-time basis as an alternative to hiring a full-time CFO in-house.
They are external consultants or contractors that companies engage with to address a range of business and financial matters.
Companies often look for fractional CFOs with relevant industry experience, helping them to navigate the unique market and financial challenges they face.
Difference between a fractional CFO and an interim CFO
Similarly, interim CFOs may also be confused with fractional CFOs, though they typically differ in terms of their engagement.
Usually, an interim CFO will work with a company full-time, though they will only be in the role temporarily–up to several months.
Often, companies will hire an interim CFO when it is between full-time CFOs, and needs someone to fill the typical duties of the role.
Interim CFOs’ work will more closely model that of a full-time CFO, compared to a fractional CFO who typically works a limited number of hours each week and is focused on a specific task or issue.
Common problems fractional CFOs help to solve
Typically, companies seek out support from a fractional CFO when they don’t have the knowledge, manpower, or expertise to handle a financial issue or roadblock with internal resources.
These are some of the common problems that a fractional CFO can help a small business solve:
- Cash flow mismanagement
- Poor profitability
- Lack of internal systems or controls
- Audits
- High expenses
- Difficulties securing funding
Fractional CFOs can draw on their professional experience and industry knowledge to help companies create a financial strategy that addresses their specific problem and improves overall performance.
What services does a fractional CFO offer?
Fractional CFOs can offer a range of services, depending on their specific area of expertise, the industry they operate in, and current demands.
Such services include:
- Budgeting
- Financial planning
- Growth strategizing
- Reorganization support
- Cash flow management
- Raising capital
- Reviewing financial performance
When to hire fractional CFO vs full-time CFO
When considering whether to hire a fractional CFO or a full-time CFO for your business, you'll want to weigh the pros and cons of each option.
Here's a comparison chart to help you make an informed decision:
11 advantages of hiring fractional CFO services
Here are 11 clear benefits of hiring a fractional CFO for your business.
1. Professional financial management at a fraction of the cost
It's often difficult for small businesses to hire a full-time CFO because of the salary that comes with the job. But small businesses need financial leadership as much as any other company, if not more.
A fractional CFO can help your growing company navigate the ins and outs of funding without the cost of hiring a full-time financial professional for the C-suite.
2. Improved investor and board relationships
Investors and stakeholders expect transparency and efficiency in financial management. A fractional CFO can help strengthen these relationships by providing accurate financial data and strategic insights to build trust and confidence.
3. Expertise in startup fundraising
Navigating the complexities of startup fundraising can be challenging. A fractional CFO can bring valuable expertise to the table, helping you create investor presentations, set financial goals, and identify potential investors.
By outsourcing this role to a fractional CFO, companies can leverage the expertise of a seasoned professional, allowing them to focus on what they do best — building their business.
4. Gain a better understanding of financial health
With guidance, you can gain insights into your company's financial performance, identify potential risks and opportunities, and develop a clearer picture of your organization's financial health. This can ultimately lead to improved financial management, increased profitability, and sustainable growth for the business.
5. Strategize for long-term goals
A fractional CFO can help you develop strategies to achieve long-term business goals. They can provide valuable insights and guidance on budgeting, forecasting, financial analysis, and more. By hiring outsourced CFO services, you can gain access to high-level financial expertise, helping you focus on long-term goals and strategy.
6. Financial reporting for more informed decisions
A fractional CFO can offer valuable financial expertise and insight. They can help analyze financial data, provide accurate forecasting, and develop a financial strategy for growth—not to mention making sure your financial statements are airtight.
Additionally, their unbiased perspective can help you identify potential risks and opportunities that may not be apparent to internal staff. This can lead to better decision-making and ultimately, improved financial performance for your business.
7. Keep financial tasks from becoming overwhelming
A fractional CFO can help your company keep your financial tasks in order. By hiring a fractional CFO, your business can benefit from the expertise of a seasoned financial professional who can effectively manage and streamline financial processes. This lets accounting and finance teams keep up with core operations even as your business grows.
8. Specialized financial services
These CFOs are typically highly experienced and have a deep understanding of financial strategies and best practices. By hiring a fractional CFO, a business can benefit from their expertise in areas such as financial planning, budgeting, forecasting, debt financing, financial modeling, and risk management.
9. Access to industry best practices
By tapping into their expertise, your business can gain access to industry best practices—knowledge that your company might not have in-house today. Fractional CFOs can also introduce innovative ideas and techniques that you may not have previously considered, giving your business a competitive edge in the market.
10. Improved cash flow management
A fractional CFO can help analyze and optimize your company's financial processes to ensure that cash is managed efficiently and effectively. By closely monitoring cash flow, a fractional CFO can identify any potential cash shortages or surpluses and develop strategies to address them.
This proactive approach can help your business maintain a healthy cash flow and make more informed financial decisions in the long run.
11. Access to financial tools and resources
Because fractional CFOs often work with several different companies, and because they generally have many years of financial experience, they may have access to financial tools and resources that your company isn't already using. In fact, building out your financial tech stack is a great reason to hire a fractional CFO!
How a fractional CFO can leverage financial automation
In today's digital age, many businesses are turning to financial automation to transform the way they manage their finances. Full-time and fractional CFOs alike can help you leverage automation tools to streamline processes, improve accuracy, and help drive growth.
By implementing automated accounting software, data analysis tools, and financial reporting systems, fractional CFOs can provide real-time insights, reduce manual errors, and make more informed financial decisions—just like the full-time CFOs in our case studies from Gardyn and The Life Link.
When Gardyn added BILL Accounts Payable to its tech stack, the company was able to save a significant amount of time over its previous systems. “I love the way we have payments set up with BILL," says Quazi Khaled, Chief Financial Officer of Gardyn. "It’s been a huge step up compared to paper-based or manual processes.”
And when The Life Link CFO Christy O’Neil decided they needed to rebuild their financial operations around digital processes, BILL provided an easy solution. "I have a workforce with varying technological skills,” admits O’Neil. “And I don’t have time to train people. But BILL is so easy to use that people can just pick it up.” With BILL, the team's monthly close went from 10 days to only one.
Whether your financial team is led by a full-time CFO, a fractional CFO, or even a part-time controller, BILL can help you improve your team's efficiency and raise financial visibility throughout your company.
Need to streamline your financial operations? See how BILL can help.
Hiring a fractional CFO FAQs
Here are answers to some common questions you may encounter when considering hiring a fractional CFO.
Is a fractional CFO worth it?
Hiring a fractional CFO may be worth the investment if your startup or small business is looking to enhance your financial management, strategic planning, and decision-making—depending, of course, on your company’s unique circumstances. Fractional CFOs offer expert financial guidance, specialized services, and industry best practices at a fraction of the cost of a full-time CFO.
How to find a fractional CFO
With these characteristics in mind, where can SMBs go to find a fractional CFO?
There isn’t just one correct answer here. Fractional CFO services may be offered by an individual contractor or as a service offering of a larger firm or consulting agency.
For instance, CPA firms commonly offer fractional CFO services based on their hands-on experience managing business finances.
Or, you may find an individual in your network who was previously an in-house CFO for several companies but now offers fractional services.
You also need to determine if you’re willing to hire a remote fractional CFO, in which case you can use an online talent marketplace to find and vet professionals.
If you want them to work on-premise, look for local firms or providers that offer these services.
How to hire a fractional CFO
When hiring a fractional CFO for your business, consider their expertise, experience, and industry knowledge. Look for someone with a track record of success in startups, financial management, and strategic planning—especially in your industry. Conduct interviews, check references, and discuss your company's specific needs to ensure a good fit.
