Have you ever heard the term Fractional CFO and wondered exactly what is a Fractional CFO? A fractional CFO offers Chief Financial Officer (CFO) consulting services to businesses on less than a full-time basis. They are also known by some of the following terms:
- Part-time CFO
- Virtual CFO
- Outsourced CFO, and
- Project CFO.
Here is how it works: you decide if your fractional CFO should work two days a week, two days a month or whatever best fits your needs and your budget. This does not mean that you get only half of the services that the CFO can offer. Your business will receive 100% of their experience, knowledge, and ability to make sure that your financial resources are strategically allocated and effectively managed.
They have the skill to look forward and help the owner look forward. Unlike a bookkeeper who simply inputs data into your bookkeeping and the controller who prepares your financial reports, the CFO is a strategic thinker. CFOs sit next to the business owner and help to make most of your decisions, so your business is profitable. In other words, everything that has happened in the past is what you need a bookkeeper and controller for, the CFO will tell you that this will happen if you do this and this will happen if you go this route and you do not want that to happen.
Roles of the Fractional CFO
- Financial Leadership Coaching with the owner/CEO
- Sophisticated analysis beyond the simple production of financial statements
- Install the best practices to the financial area of the business
- Assist the CEO/owner in identifying and quantifying the goals of the organization
- Relationship management to the investors, lenders, vendors, and customers
- Provide leadership when raising capital
- Provide mentorship to the company’s current accounting and finance team
Why Should You Use a Fractional CFO?
A CPA is a reporter to the IRS and an employee that can tell you whether your business is doing well or not, but have you looked beneath the surface to see what your financials are really telling you? Do you have the information you need to make the decisions today that will affect your profitability tomorrow? Have you done a cash flow forecast for the next six months that take into account your payroll expenses, business expansion, marketing cost? Have you analyzed the profitability of every product you sell or the services you provide? Have you tracked that profitability over the last six months or even three years?
This is where a fractional CFO makes a difference. The CFO takes a more global look and understands your banking needs, your tax needs, and your accounting needs. The benefit of having a fractional CFO for any business is the CFO skills and experience. This is especially advantageous to a smaller organization that would not be able to afford a full-time Chief Financial Officer, who will advise the owner/CEO on the financial aspects of the business.
Another major benefit of having a fractional CFO as opposed to a full-time professional is that your business will also pay only a fraction of the cost. The CEO gives the business an objective view. He or she is someone from the outside, who is not there daily, meshed into the daily politics and what the company believes it is doing on a daily basis, and who can point out things the owner/CEO might not have thought about.
Your business is probably competing against bigger companies with CFOs that bring their knowledge about best practices, strategies, and tactics for their teams to help them compete more effectively against you. So, why not make it a fair fight?
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Author: Charles Lutwidge