Why Businesses Need Fractional CFO Services? (And What Great Service Looks Like)

As the term suggests, a fractional CFO provides companies with the knowledge, skills, and guidance a CFO brings, but on a part-time or interim basis.

It wasn’t long ago that there was no formal concept of a Fractional CFO. Some professionals operated in this capacity via referrals or as an interim CFO… but outsourcing the whole CFO function was not really a thing. There was also a time in the not-too-distant past when the I.T. department was primarily 100% in-house. Now, most entrepreneurs are wise to the fact that outsourcing all or part of that function of their business makes a lot of sense.

This same trend is (and has been) happening with the accounting function. Most companies need an outsourced CFO to handle responsibilities that go beyond what a bookkeeper or even a controller does.

That can cover a lot of territories, from obtaining capital to making financial forecasts to working closely with you to plan for future strategy to evaluating a department’s productivity, and much more.

But often, companies that need someone to handle at least some of those responsibilities cannot justify having a full-time CFO. In that case, hiring an outsourced or “fractional” CFO is actually better than the alternatives.

Some alternatives:

1) Doing without any CFO talent. Or assigning those tasks to employees that do not have the right skills (which is not a great solution for the company or employee) trying to keep things going without solid financial forecasts, evaluating your sales strategy using a seat-of-the-pants approach, and so on.

2) Hiring a full-time CFO too early, adding to your payroll liability and over-paying someone at a senior level when you could allocate those company resources to boost your sales department, or upgrade needed technology, or more.

The stumbling block for most small business owners is not knowing when or how to get started. They might have a working idea of what insights and financial strategies they need help discovering and deploying but are often unsure what they really need a Fractional CFO for and when their business is ready to engage such a professional.

So, when will you know your business is ready to engage with an outsourced CFO? 

Some questions to help you determine if it’s time to hire a fractional CFO:

Do you need…

• to procure capital for your business?

• assistance in projecting and planning for future cash flow requirements?

• to create forecasts, projections, budgets, and/or proformas to grow your business, increase profitability or gain strategic insights?

• help building a strategic plan with the right KPIs to achieve your growth goals?

• help building a strategic compensation and equity plan for key employees in your business?

• help creating and implementing internal financial controls for your business?

• help preparing for and engaging with external financial statement auditors?

Even if you answered yes to only one of those questions, you should start a conversation with a company that provides fractional CFO services. The right offering may address your basic accounting needs to begin with but will be flexible to grow with your increasing needs as your business matures. The CAS Group will meet you where you are and help get you where you want to go, and scale along side you.

Hiring a fractional CFO can also head off financial trouble. When profitability is not where it seems like it should be, or cash flow is a problem, or the books are not done right, you need help but may not know exactly what kind. The right fractional CFO can figure out what you need and has no conflict of interest.

For example, when the economy slows and growth assumptions have to be pared back, you will have to make some difficult decisions. That may involve reducing compensation, staff, and/or warehouse space, pressuring suppliers for better terms, or seeking new capital.

Making those recommendations can be difficult for managers who want to protect their staff and their “turf”. A fractional CFO can provide objective analyses of trade-offs among alternatives and help to implement whatever is best for the company.

A great CFO can be a contrarian when you need one, and it is easier for a fractional CFO to play that role than someone in-house.

What do great fractional CFO services look like?

A great fractional CFO is an indispensable partner to your business. They are the bridge between vision and execution. You know the business, the industry, and the customers and you have the vision for providing superior value to your customers and employees. A fractional CFO is there to ensure the strategic plan is economically viable, properly funded, and the progress toward achieving the plan is defined, closely monitored, and adjusted when needed.

A great fractional CFO will gain a deep understanding of your business's current financial state, the current needs of the business, and your long-term vision. Additionally, they will get a clear understanding of the financial and operational metrics you want to gain visibility into, along with recommending common metrics for the industry.

• They will also structure a plan to address the business's financial and accounting needs. They will deep dive into the margins and profitability of products, services, locations, etc., and provide insight into what’s working and what’s not.

• They will provide an in-depth financial plan, which defines the financial and operational goals of the business, including KPIs (i.e., leading indicators).

• They will form a financial plan for obtaining capital (debt/ or equity) to support the businesses future growth strategy.

Every business is unique, and the particulars of what your business needs won’t follow a strict, one-size-fits-all template. The CAS Group works within a flexible framework that accounts for the major strategic and compliance-related issues facing your business. We have perfected our system of discovery and onboarding and are flexible in developing the winning strategy along side you, to help you achieve your highest goals.