When & Why Your Business Should Consider a Fractional CFO

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A CFO plays a crucial role in this process by providing financial know-how from years of industry experience. However, having a CFO on staff can be too costly for many small and medium sized businesses. Typically, the CFO is responsible for managing the economic well-being of an organization; they advise the CEO on strategic financial decisions, current challenges, and future-oriented financial plans. In this article, we’ll delve into some questions the smaller business may be wondering: when and why should I consider hiring a fractional CFO or Chief Financial Officer?

Why and When Organizations Need a Fractional Chief Financial Officer?

In many small and medium-sized businesses, a bookkeeper or controller keeps the financial system running smoothly by recording transactions accurately and on time. The CPA handles tax returns and some genuine performance analysis periodically. However, there is often a wide gap in available information and management reporting.

Therefore, business owners and entrepreneurs might need more financial insights to make informed decisions or present to lenders or investors. The fractional CFO handles all aspects of financial operations efficiently, from accounting and financial reporting to cash management, budgeting, and maintaining controls. They also deal with crucial matters like capital structure, investor relations, and financing. Let’s explore the valid reasons for hiring professionals for this role.

Cost Savings

A full-time CFO draws a hefty salary and extra benefits. However, a fractional CFO lets businesses tap into CFO skills without the same expenses. The average full-time Chief Financial Officer earns nearly $334,103 and $565,829 yearly in the USA, which is especially helpful for smaller businesses or startups with tight budgets. Fractional CFOs can guide businesses in making intelligent financial choices, handling cash flow well, and streamlining internal processes for better efficiency. By using their financial insight, organizations can save money and distribute resources more wisely.

Enhanced Decision Making

Precise and current financial records help entrepreneurs make informed choices that reduce costs. They also prevent loss by telling founders when their ideas are not working. Important business decisions that depend on this data include how to get funds (or whether to use profits for growth), if there’s time to make products bigger or smaller, go into new markets, introduce new products, buy out other companies, or invest in new equipment.

Adaptable Strategies

Fractional CFOs enable companies to change the amount of financial help they receive as business needs change. This means they can get more help when things get busy (and maybe pay more as a result) and less when they’re not feeling so swamped — all without having to commit long-term. Fractional CFO services allow organizations to try out different strategies without making a full-time hire or spending too much money right away. This way, if something doesn’t work, there’s less pressure since the arrangement can always be adjusted.

Specialized Skills

CFOs have a lot of knowledge about a wide range of business matters which they have acquired over many years of working in different companies and industries. This is what separates them from accountants. A CFO’s background equips them well for swiftly dealing with various challenges both financial & non-financial by using methods that have been shown to work.

When should you consider Fractional CFOs?

For any business, it’s important that financial matters are managed effectively. This includes having clear records of how well the company is doing financially, being aware of risks and how to reduce them as well as ensuring steady growth all the time . However, because many small businesses may not have individuals with lots experience on their teams, they might find it hard to do all this on their own.

Here is a way to find out if your business would benefit from having a part-time CFO:

  • Does your business want to grow more effectively? If yes, a part-time CFO will help it happen. They will come up with financial strategies that work for you –– like finding ways to fund your expansion plans or figuring out how to make more money from the ones already in place.
  • Think about these things before you decide that a fractional CFO is what your company needs: Right now, what jobs does someone need to do as CFO? Do you think these tasks will stay the same or change in the future? Is there enough money in the budget to pay for this level of leadership?

Conclusion

Like a full-time CFO, a fractional CFO focuses on working on the business rather than on it. Yet, a fractional CFO offers versatility by handling interim, project-based, or part-time permanent roles depending on organization-specific requirements. These wide job roles make them invaluable for growth. However, flexibility is not their sole advantage. In certain situations, hiring a Controller might be preferable to searching for a CFO. Alternatively, business requirements may demand a CFO, but budget constraints make it challenging. In such cases, fractional CFOs are an ideal solution!

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