Managing company finances is often a challenge for small business owners, especially those who don’t have prior experience in business or financial management.
Once the business grows to a certain point, many founders find that they need to add a financial expert to their team. The question then becomes: How?
Perhaps you’re not ready to bring on a full-time CFO, whether because of the cost or because there isn’t enough work to justify a full-time financial executive. But you can have the best of both worlds—financial expertise and guidance, without hiring someone full-time—with a fractional CFO.
These company leaders are brought on to manage finances, help determine direction, and generate growth, all for an hourly rate or a monthly fee. Similar to virtual CFOs, fractional CFOs work in specific intervals tailored to the unique needs of your business. Sounds intriguing? Let’s take a closer look at the role of a fractional CFO and how to determine if hiring one is the right choice for your company.
What does a fractional CFO do?
Fractional CFOs provide leadership for small businesses and companies that need additional financial expertise but cannot, or do not want to, hire someone for the role full-time. The best fractional CFOs are financial experts who have experience specific to your industry. They can help shape your company’s growth, direct your spending, and build strategies that enable overall business success.
Here are some of the common responsibilities of fractional CFOs:
- Forecasting: They will analyze data and help craft a business strategy based upon your goals and where they anticipate the company will be in the future.
- Analyzing: A seasoned fractional CFO will conduct data analysis and lend his or her expertise to key business decisions, determining which courses of action are the wisest financial choices.
- Managing Funding: Fractional CFOs can manage company funding, relationships with lenders and investors, and help raise capital.
- Consulting: Fractional CFOs can consult on any business decision to determine its financial implications.
Specifically, fractional CFOs can take care of these recurring tasks:
- Strategic financial planning
- Long-term and short-term forecasting and analysis
- Detailed budget creation
- Cash flow analysis
- Management of accounting team and/or accounting functions
- Tax planning, filing, and compliance checks
- Guidance on employee benefits including 401(k), health insurance, and other insurance plans
What does a fractional CFO cost?
If you’re looking to hire a fractional CFO, you can expect to pay between $3,000 and any where to $30,000 a month on retainer.
This number will vary based upon the goals of your company, the complexity of the work, and the number of hours you need. If money is a significant factor for your business, hiring a fractional CFO may be the best way to gain financial leadership without spending beyond budget.
How do I pick the right fractional CFO for my business?
When hiring a fractional CFO, look for someone with multiple years of experience in financial leadership roles, and who has a track record of growth at the companies they have led. It is also wise to partner with a fractional CFO who has experience in your particular industry.
Some fractional CFOs may require a minimum amount of hours or a specific contract. Review these options and determine your level of need before signing on with any particular person.