A fractional CFO (chief financial officer) offers many benefits to small to mid-sized businesses, including improved financial health and streamlined cash-flow management. Hiring a fractional CFO provides the perfect balance between improving efficiency in your financial operations and gaining access to a financial expert without breaking the bank.
Fractional CFOs are the perfect solution for small or newly established businesses because they provide invaluable financial experience without the price tag of a full-time CFO. Fractional CFOs work with businesses on a part-time or hourly basis to fit their budgets and specific needs.
Key Benefits a Fractional CFO Brings to the Table
A fractional CFO offers invaluable insights on strategic planning, financial analysis, and financial processes. This helps you as a business owner to grow your business at an accessible price. Fractional CFOs or interim CFOs can also fill a gap in the management team if your previous CFO has left. According to research from Business Talent Group (BTG), the demand for interim CFOs rose 103% year-on-year between 2022 and 2023.
There are several important advantages to working with a fractional or interim CFO:
1. Improved Communication between Investors and the Board
All investors and stakeholders with interests in your business expect a tight financial strategy that yields results. Fractional CFO services provide stability and reassurance to the board by communicating important information from a strategic financial perspective and providing transparent financial reporting. When a business is new or is facing financial challenges, a fractional CFO can find solutions and present them to the board in a way that is easy to understand.
2. Help New Small Businesses With Fundraising
Fundraising in small businesses or startups can be one of the biggest challenges that new business owners face. Bringing in a fractional CFO from the beginning means that you can utilize their experience and expertise to build a compelling investor presentation, set clear financial goals and budgets, and target potential investors.
3. Help the Management Team Understand the Business’s Financial Health
Running a successful business requires close monitoring of your numbers by an expert. This involves checking your financial data for accuracy and compliance as well as creating projections for the future.
A fractional CFO helps to set your business on the path to long-term financial stability thanks to his or her expert insights. For example, your CFO can use cash-flow data to help you and your management team understand exactly how much is coming in and going out of your business and why. This information helps you make informed decisions going forward.
4. Establish Long-Term Goals
As well as getting you over the initial hurdles of securing funding and smoothing out teething problems in a new business, a fractional CFO also helps you focus on the future by implementing a strategy that helps you achieve your long-term goals.
A CFO will work with you to create specific objectives and track several performance KPIs to put your business in good stead for growth and expansion. They will work with your knowledge of the business and what it needs to build a plan for funding the investments you’ll need to make as your business grows.
5. Make Financially Sound Business Decisions
It can be overwhelming for business owners to track and analyze their business’s financial data, especially if they are new to business. Instead of spending hours poring over large quantities of data, it might be more efficient to make decisions based on conclusions provided by a fractional CFO.
Fractional CFOs create summaries, charts, and analyses of current and historical data (as well as create financial projections for the future) to help you make informed decisions and optimize your financial management.
Fractional CFOs also understand the intricacies of the system in their state and know how to take advantage of them. They will know for example how a business in Florida can thrive, based on strategies used by similar businesses in the area and tax credits available in the state.
6. Allow You to Focus on Other Aspects of Your Business
Taking care of the financial side of your business is a huge potential burden for people without experience. Even simple tasks like creating budgets can be a struggle when you’re already juggling so many other responsibilities. A fractional CFO takes a time-consuming and perhaps stressful job off your hands. This allows you to focus on other parts of your business that are important to you.
7. Expertise in Specialized Financial Services
Businesses in different sectors may have different financial needs. For example, SaaS startups have a different revenue model compared to construction companies and restaurant chains. A fractional CFO will use different KPIs to assess your current and projected profitability, depending on the nature of your business.
When your business is involved in financial activities such as mergers and acquisitions or is undergoing a process of corporate restructuring, a finance expert gives you invaluable strategic insight.
8. Help Your Business Scale
Your financial needs as a startup will change as you start to grow. A fractional CFO understands this and adapts to your business’s changing financial outlook and helps you with strategic planning at every stage. They understand that a growing business deals with more transactions and expenses and that finances must be scaled accordingly for the business to remain profitable.
9. Advice on Financial Tools and Resources
Fractional CFOs understand the value of financial tools such as financial software, data analysis tools, and automation tools and how they can streamline your financial processes. They explain the different options that exist and indicate which software solution would work best for your company.
Outsourcing financial services is more cost-effective than investing in locally hosted software or hiring and training an in-house financial expert. The money that is saved can then be invested back into your business.
11. Provide a Balanced Opinion on Company Finances
Internal teams are sometimes prone to bias or tunnel vision when it comes to making important decisions. A fractional CFO comes with no biases that could cloud their judgment as all financial decisions are based on research and data as well as their experience in the field.
12. Access to a Wealth of Experience
Many traditional CFOs stay in the same industry their whole careers. While their advice may be vital to your business, a fractional CFO offers another dimension of knowledge and experience. This is because they have likely worked with many different industries throughout their career.
Businesses need a CFO who has experience with their specific business model. Because fractional CFOs work with many different startups and established companies, they have a wide range of industry experience ready to apply to your company.
Build a Financially Healthy Business With a Fractional CFO
A fractional CFO helps businesses of all types find their feet financially as they grow. Whether your business is a startup, is growing, or perhaps facing uncertainties, the expertise of a fractional CFO will steady the ship in an ever-changing business environment.
The flexibility that fractional CFOs offer helps them adapt to the structure and budget of your business. With no long-term commitment and at a cost you can afford, hiring a fractional CFO will help your business navigate whatever comes next.