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Maximizing Financial Performance with a Fractional CFO: How to Choose the Right Fit for Your Company

A fractional CFO is a part-time CFO who provides outsourced CFO services to multiple small businesses.

Maximizing Financial Performance with a Fractional CFO: How to Choose the Right Fit for Your Company
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Working on a fractional basis with an experienced CFO can improve the financial management of a small business to a lower middle-market company. Companies that hire a part-time CFO gain valuable Chief Financial Officer experience without incurring the cost of hiring a full-time CFO until it becomes affordable.

What is an Fractional CFO?

A fractional CFO is a part-time CFO who provides outsourced CFO services to multiple small businesses. Hiring a fractional CFO as an independent contractor (rather than a full-time CFO) lowers business expenses. It gives you access to higher-level strategic planning, cash flow, advisory, negotiation, and financial analysis skills in addition to financial statement preparation.

What Services Can a Fractional CFO Provide?

A fractional CFO serves on the executive management team. Among the fractional CFO services are:

  • Strategic planning
  • KPIs
  • Business plans and pitch decks to raise venture capital
  • Financial modeling
  • Valuation
  • M&A due diligence
  • Deal room documents
  • Forecasting and budgeting with variance analysis
  • Cash flow management
  • Banking relationships
  • Business intelligence
  • Financial analysis (FP&A)
  • Reports and presentations
  • Decision-support
  • Negotiations, and
  • Investor relations.

A fractional CFO may prepare board meeting presentations and present them to the Board of Directors if invited. Despite the fact that most small businesses do not own real estate, a fractional CFO can negotiate office space and equipment leases.

On the CEO's request, a fractional CFO will perform additional project services. An experienced CFO working part-time can serve as a trusted advisor, assisting CEOs, entrepreneurs, and business owners in making sound business decisions and striving for profitability.

The types of fractional CFO services offered by a professional Chief Financial Officer vary depending on whether the part-time CFO works alone or as part of a team. A part-time CFO business provides more CFOs to choose from as well as other independent contractors to hire for accounting services, such as a bookkeeper, financial professionals, and controller.

Fractional CFO Services Agreement

To define the scope, your company or the fractional CFO should provide a negotiated part-time CFO job description in a fractional CFO services agreement. To define the cost of financial services, the services contract should also include fractional CFO pricing and maximum contracted hours or a monthly retainer amount.
You'll both understand what fractional CFO means and how much financial services cost based on your company's needs.

Difference between an Interim CFO and a Fractional CFO?

Because the interim CFO role is temporary, it differs from that of a fractional CFO (part-time CFO). An interim CFO bridges the gap between the company's loss of its full-time CFO and the hiring of a new CFO. A fractional CFO's services are ongoing, though the number of hours per week is limited to a part-time basis.

An interim CFO is occasionally a current employee with financial expertise who is temporarily promoted to that role as a tryout for acting CFO. If competent and a good cultural fit exists, the interim CFO may be chosen as the next Chief Financial Officer after competing against outside candidates.

How to Find a Fractional CFO for Hire?

Several sources can help your company find a fractional CFO for hire. Is your company planning to hire a part-time CFO through payroll or to hire an independent contractor or freelancer through a contract? It is up to you to decide where to look for a fractional CFO.

You can find a fractional CFO for hire through:

A fractional CFO may be referred to you by your CA firm, attorneys, or other professional teams. Public accounting CPA firms must maintain their independence from the companies they audit. As a result, they are not a direct source of part-time CFOs.

What Qualifications do Fractional CFO's Have?

A fractional CFO is a skilled part-time CFO with previous full-time CFO and public accounting experience who is familiar with financial statements and financial reporting. The typical fractional CFO began their accounting career at a Big 4 CPA firm, has an MBA, and has served as the Chief Financial Officer of one or more companies.

Fractional CFOs are familiar with small business finance and running lean organizations with limited resources. Part-time CFOs may have experience with equity funding and bank lines of credit for startups and small businesses, as well as M&A knowledge.

The current CFO role has shifted toward creating strategic value. With the CEO team's collaboration, the fractional CFO must be able to perform at that level. Fractional CFOs must contribute to financial strategy and business profitability, think strategically, and provide financial analysis-based decision-making support.

The fractional CFO typically has a current state-issued CPA license or CMA certification for management accountants. Although the financial statements are prepared by the controller or bookkeeper, the CFO should understand generally accepted accounting principles (GAAP) and be familiar with small business ERP systems and accounting software.

Benefits of Fractional CFO Services

  • Using fractional CFO services can provide multiple benefits for your business:
  • Cost-effective alternative to hiring a full-time CFO
  • Access CFO skill set to improve decision-making and profitability
  • Impressive resume for fundraising
  • Completing projects faster with added resources and focus
  • Mentoring and training

FAQ on Fractional CFO

Q: What is a fractional CFO?

A fractional CFO is a financial professional who provides CFO-level services on a part-time or project-based basis, rather than serving as a full-time CFO. Fractional CFOs typically have extensive experience and expertise in financial management and can provide valuable guidance and support to companies that may not need or be able to afford a full-time CFO.

Q: What are the benefits of hiring a fractional CFO?

Hiring a fractional CFO can provide a number of benefits to a company, including access to top-level financial expertise without the need to commit to a full-time CFO. A fractional CFO can help a company improve its financial performance, plan for growth, and make better-informed business decisions. Additionally, a fractional CFO can help bridge any gaps in the company's financial leadership and provide valuable perspective and guidance.

Q: How does a fractional CFO differ from a full-time CFO?

A fractional CFO is similar to a full-time CFO in terms of their knowledge, expertise, and responsibilities. However, a fractional CFO works on a part-time or project-based basis, whereas a full-time CFO is typically a permanent member of the company's leadership team. This means that a fractional CFO may not be as involved in the day-to-day operations of the company, but can provide valuable guidance and support on an as-needed basis.

Q: What should a company consider when hiring a fractional CFO?

When hiring a fractional CFO, a company should consider factors such as the CFO's experience and expertise, their availability and flexibility, and their compatibility with the company's culture and business goals. It is also important to discuss the specific responsibilities and expectations for the fractional CFO, as well as the terms of the engagement, including the duration, compensation, and any potential conflicts of interest.

Q: How can a company find the right fit for a fractional CFO?

To find the right fit for a fractional CFO, a company can start by conducting a thorough search and review of potential candidates. This can involve reaching out to industry contacts and networks, researching industry associations and professional directories, and considering referrals from trusted sources. It is also important to carefully evaluate each candidate's experience, expertise, and references, as well as to conduct interviews and discuss the company's specific needs and goals.

About Jordensky

At Jordensky, we are committed to providing an experience of the highest caliber while specializing in accounting, taxes, MIS, and CFO services for startups and expanding businesses.

When you work with Jordensky, you get a team of finance experts who take the finance work off your plate– ”so you can focus on your business.

Akash Bagrecha

Co-Founder of Jordensky