Comparing Fractional CFOs and Fractional Controllers: Which One is Right for Your Startup?

As a business owner or manager, you may be considering hiring a fractional financial professional to support your organization. However, it can be confusing to know the difference between a Fractional CFO and a Fractional Controller, and which one is right for your business.

In this blog, we will explore the roles and responsibilities of each position and provide some guidance on how to determine which one is the best fit for your organization.

First, let's define each role:

Definition of Fractional CFO and Fractional Controller

Fractional CFO (Chief Financial Officer)

Fractional CFO is a financial executive who works on a part-time or project basis to provide high-level financial strategy and support to an organization. A fractional CFO typically has a broad range of financial and business expertise, and is responsible for developing and implementing financial plans, analyzing financial data, and advising on financial matters.

Fractional Controller

Fractional Controller on the other hand, is a financial professional who focuses on the day-to-day financial management of an organization. A fractional controller is responsible for tasks such as preparing financial statements, managing budgets, and ensuring compliance with financial regulations.

Difference between Fractional CFO and Controller

Now that we have a basic understanding of each role, let's consider some key differences between the two:

• Scope of Responsibility: A fractional CFO tends to have a broader scope of responsibility than a fractional controller. A CFO is responsible for developing long-term financial strategies and advising on financial matters, while a controller is focused on the day-to-day financial management of the organization.
• Level of expertise: Both fractional CFOs and controllers are financial experts, but CFOs tend to have a deeper level of expertise due to their broader scope of responsibility. CFOs often have a background in finance, accounting, or business, and may have a CPA or MBA. Controllers may also have a background in finance or accounting, but their focus is typically on the day-to-day financial management of an organization rather than high-level financial strategy.
• Cost: Fractional CFOs tend to be more expensive than fractional controllers due to their higher level of expertise and broader scope of responsibility.

So, how do you determine which one is right for your organization? Here are a few factors to consider:

• Size of your organization: If you are a small or medium-sized business, a fractional controller may be a good fit. A controller can handle the day-to-day financial management of your organization, freeing up time for you to focus on other areas of the business. On the other hand, if you are a larger organization with more complex financial needs, a fractional CFO may be a better choice.
• Stage of your business: If you are a start-up or early-stage business, a fractional CFO may be a good fit. A CFO can help you develop financial strategies and plans to support your long-term growth. If your business is more established, a fractional controller may be a good choice to handle the day-to-day financial management of the organization.
• Financial needs: Consider your current financial needs and goals. If you need help developing financial strategies and plans, or if you are facing financial challenges that require high-level financial expertise, a fractional CFO may be the better choice. If you simply need support with the day-to-day financial management of your organization, a fractional controller may be a good fit.

What Kinds of Projects Can a Fractional CFO Assist With?

A fractional CFO can help with a variety of projects, both financial and non-financial in nature. The CFO's role is complex and can be broken down into specific pain points and influence areas.

1. Companies Seeking Funding

One of the leading causes of startup failure is a lack of funds. A growing company will require capital injections to grow or sustain operations in a downturn, in addition to having a tight grip on company finances and cash flow management. Fractional CFOs can help with fundraising (typically beginning with Series B) or debt management (e.g., negotiating bank loan terms). They can expertly parse the numbers being negotiated and help plan where the investment can take the business because of their combination of financial acumen and strategic insight.

2. Making Complex Budget Allocation Decisions

High-growth businesses are frequently forced to choose where their money should be spent. A company that does not yet have a full-time CFO can use a fractional one to evaluate the project and support decisions during intensive, time-sensitive sprints when deciding whether to pursue an acquisition or change distribution channels from retail to digital.

3. Internal Process Improvement

Internal processes serve as the glue that holds strategy, operations, and performance together. A CFO is uniquely placed to understand the cost and contribution of each step and guide its optimization. The CFO is responsible for evaluating all processes and clearly understanding their financial contribution to profitability and cash flow. This practise keeps management up to date on the company's actual performance and shareholder returns. Fractional CFOs can also develop best practise processes for documenting these reviews to ensure ongoing continuity and efficiency.

4. Restructuring Periods

Restructuring a business necessitates a thorough understanding of processes (as mentioned above), the ability to assess how to optimize capital structure, and an understanding of cost optimization and cash flows. During a restructuring, CFOs must detach from the business's established norms and assist in reorganizing activities and finances toward the new vision.

5.Regulatory Shifts Are Underway

Additional regulation, such as reporting, compliance, and disclosure obligations, necessitates specialized knowledge and experience. Under-reporting or misinterpreting rules can have disastrous financial and reputational consequences, so it's always best to over-prepare. A fractional CFO can relieve the CEO and senior management of these responsibilities while assuring external stakeholders that the job is being done properly. Because fractional CFOs are likely to have worked in multiple industries, their breadth of expertise and understanding of diverse regulatory requirements will provide opportunities for knowledge transfer within incumbent teams.

Services of Fractional CFO and Fractional Controller?

You may be confused about the distinctions between these various roles on your accounting team. Controllers and CFOs, for example, have similar roles with a few key differences. As your company grows, the ability to produce accurate, efficient financial statements will become increasingly important to its success.

A fractional CFO is primarily in charge of your company's financial operations. This includes cash flow management, financial planning, and determining where a company's financials are strong and weak. An outsourced or fractional Controller, on the other hand, is the head of accounting and oversees the preparation of balance sheets, income statements, and other financial reports. They also conduct compliance audits, manage internal controls, assist with budgeting, and analyse financial data for your company. Some businesses also charge their Controllers with evaluating and selecting the technology used in finance departments.

There is a lot of overlap between these two roles, and they both work very closely together, but the CFO's job is much more strategic, and they use the data from the financial statements to guide their decision making. The Controller is in charge of ensuring that the financials tell the correct story so that the CFO can correctly guide you and take your business to the next level.

Should I hire a Fractional CFO, Controller, or both?

When assembling a strong accounting team, you may wonder who to hire and whether to outsource talent rather than hire internally. A Controller may be required if you need to supervise a bookkeeper or your internal accounting team. Hiring a Controller will also ensure the accuracy of your financial reporting, help with the financial close process, risk mitigation, and so on. A CFO will assist your company if it requires additional guidance and supervision of its finance team, a more sophisticated reporting and analysis system, assistance with stakeholder reporting and better report package generation, or fundraising assistance.

Having a CFO and Controller on your team can be extremely beneficial regardless of the stage of your business or your goals. To ensure that accounting work is completed at the appropriate levels, each of our clients is assigned a CFO, Controller, Accounting Manager, and Staff Accountant.

What Size Companies Need CFOs?

A small business may be able to combine the functions of controller and CFO. When a company considers complex financial market transactions such as mergers and acquisitions, the separation of duties begins. The CFO interprets financial data, handles capital acquisition, and implements cost-cutting measures in small to medium-sized businesses. They may also be the only source of income.

The need for a CFO is determined by a number of factors other than the amount of revenue generated. A company with $10 million in revenue may be ready for a CFO, whereas one with $20 million may not be. When a company is experiencing rapid growth, hiring more employees, or changing operations, such as in a merger or acquisition, it is best to bring in a CFO. The financial controller's role varies according to the size of the company. Controllers in small businesses handle accounting tasks that are beyond the capabilities of the average bookkeeper.

Small business owners frequently believe that they can avoid hiring a controller. If the bookkeeping tasks become too complex, a controller can take over the accounting and bookkeeping functions as well as auditing, financial reporting, and payroll management.
A controller's responsibilities in a midsize company are likely to include project management as well as regulatory and compliance functions. The main distinction is that a CFO will analyse your financials in the context of your business goals.

FAQ on Fractional CFO VS Fractional Controller

Here are some frequently asked questions (FAQs) about fractional CFOs and fractional controllers:

Q: What is the main difference between a fractional CFO and a fractional controller?

The main difference between a fractional CFO and a fractional controller is the scope of responsibility and level of expertise. A fractional CFO has a broader scope of responsibility and a higher level of expertise, focusing on high-level financial strategy and advice. A fractional controller, on the other hand, has a more narrow scope of responsibility and focuses on the day-to-day financial management of an organization.

Q: When should I hire a fractional CFO vs. a fractional controller?

The decision to hire a fractional CFO or a fractional controller will depend on the size and stage of your organization, as well as your current financial needs and goals. If you are a small or medium-sized business, a fractional controller may be a good fit to handle the day-to-day financial management of the organization. If you are a larger organization with more complex financial needs, or if you are a start-up or early-stage business looking to develop financial strategies and plans, a fractional CFO may be a better choice.

Q: How much does a fractional CFO or fractional controller cost?

The cost of a fractional CFO or fractional controller will depend on a number of factors, including the level of expertise and experience of the professional, the scope of responsibility, and the needs of your organization. In general, fractional CFOs tend to be more expensive than fractional controllers due to their higher level of expertise and broader scope of responsibility.

Q: How do I choose the right fractional CFO or fractional controller for my organization?

To choose the right fractional CFO or fractional controller for your organization, consider the size and stage of your business, as well as your current financial needs and goals. Research different professionals and compare their experience and expertise to determine which one is the best fit for your organization. Consider reaching out to professional associations or networking with other business owners to get recommendations.

Q: Can a fractional CFO or fractional controller work with my existing financial team?

Yes, a fractional CFO or fractional controller can work with your existing financial team. They can provide additional expertise and support to your team, and can help to develop financial strategies and plans to support the long-term growth of your organization. A fractional financial professional can be a valuable resource for your business, providing the expertise and support you need without the need for a full-time hire.

Jordensky is a leading provider of fractional CFO services for small and medium-sized businesses. Our team of experienced financial professionals is dedicated to helping you grow and succeed by providing the strategic financial guidance and support your business needs.

Whether you are a start-up or an established business, Jordensky can help you take your financial performance to the next level. Contact us today to learn more about how our fractional CFO services can benefit your business.

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