What is a fractional CFO?

Small Business Fractional Chief Financial Officer Services

When you’re starting a company, there are many challenges you will face. You can outsource some things to someone else if you don’t have the time or expertise to do them yourself. One such outsourced function of a business is finance. This article will explore what a fractional CFO entails and how it can save your company time and money.

A Chief financial officer, or CFO, is a senior executive responsible for managing any company’s financial actions and typically working full-time. Becoming a CFO requires a certain degree of experience in the industry. A Chief Financial Officer is often the highest financial position and the third-highest position in a company, playing a vital role in the company’s strategic initiatives. Most people in this position have advanced degrees and certifications, such as a graduate degree in finance or economics and the Chartered Financial Analyst (CFA) designation.

Fractional Chief Financial Officers and Financial Executives provide services on a contract or part-time basis. They offer their services as consultants or advisors, helping businesses with everything from strategic planning to budgeting and forecasting. Fractional finance officers know startups or developing companies seeking advice for accounting, finance, and management.

CFOs work closely with other company senior executives, such as the Chief Executive Officer (CEO) and Chief Operations Officer (COO). In recent years, the scope of the CFO role has expanded into operations, marketing, and general management advisors. Fewer and fewer companies are carrying a COO, which places a greater demand on the fractional Chief Financial Officer.

In a small business, it is common for the CFO to have a Controller title. A Financial Controller leads more giant corporations’ day-to-day accounting and reporting functions. In contrast, the CFO focuses on strategy, planning, and banking relationships. Regardless of the size of your company, the benefits of retaining an experienced Chief Financial Officer on a part-time basis can help accelerate bottom-line performance.n

How does a fractional CFO work?

Outsourced CFOs or finance executives work on a contract basis with preset terms, conditions, and scope of work. The functions of fractional CFOs range from conducting internal audits, reviewing bookkeeping procedures, and implementing new accounting and finance software, to working with external banks to secure funding.

The role of a fractional CFO will vary depending on the size and type of company. Some companies may require quarterly reports and tax preparation, while others may need daily monitoring of financial activities. The important thing is that they work with you to create an agreement that meets all your needs.

A good fractional CFO can help you create a strategic plan for your company that will help it grow over time. This includes developing business plans and projections based on your current goals and objectives. They will provide ongoing assistance, advice, and crisis management in need.

What is the difference between a CFO and a fractional CFO?

Whether you have a small business idea, a new business, or have your own business, you have financial obligations that require professional leadership. Your corporate finance department can transform operational performance and drive strategic growth.

A traditional CFO is employed full-time, whereas a fractional CFO is hired for a portion of the cost to perform the same duties. For example, your food truck business is growing with multiple operating units. A fractional CFO can help you manage cash flow, forecast profits, and analyze capital purchases to protect your company’s finances.

Why would I hire an outsourced CFO?

Here are a few reasons why a business may seek out a fractional CFO:

  • There is only time to perform daily bookkeeping and accounting
  • Cash flow forecasting is too complex, and current forecasts are inaccurate
  • Rapid growth entities expanding into new markets
  • Companies seeking acquisition growth
  • Business performance is diminishing, and you need advisory to regain financial control
  • The capital structure of the firm is changing either through equity or debt financing
  • Limited growth prospects due to extended operating cycles with cash tied into receivables or inventory
  • Lack of structure within inventory management systems
  • Mergers and Acquisitions

It may be helpful to work closely with a Chief Financial Officer (CFO) who may be better equipped to provide you with financial advice that is best for your company and its individual needs. Many businesses, such as startups, rapidly growing companies, and small businesses, lack a chief financial leader who benefits from a fractional CFO. If your team is a one-person accounting and finance department, outsourcing can help remove internal constraints.

When you hire a fractional CFO, they’ll come on board as part of your team and report directly to you and your executive team. They’ll provide strategic advice and help you implement their recommendations through their expertise in data analysis, accounting, tax law, financial analysis, investment strategy, decision-making, and more.

An accurate budget is crucial for business owners because it helps them ensure they have enough monthly money to cover all their expenses. A fractional CFO can help you create an accurate budget by forecasting future revenues, costs, and liabilities so that you can see if your company is on track or if adjustments need to be made.

Experienced finance leaders are well-versed in solving many problems throughout their experiences within the financial industry, making them well-versed in their field and allowing them to help your firm outside the finance and accounting departments. It is typical for outsourced providers to work on mini projects within your more extensive scope of work to achieve results efficiently.n

What are the benefits of an outsourced finance department?

Outsourced CFO services are becoming an increasingly popular management option for companies of all sizes and industries. When implementing an outsourced Chief Financial Officer, your team will add financial leadership and management advisory to ensure effective decision-making to run a successful business. The benefits of outsourcing your finance department include the following:

1) Cost Savings

Outsourcing your finance department can help you reduce your overall expenses, which could mean more money in your pocket. You can save money by outsourcing your finance department to a third-party provider, as they can provide you with the same level of service at a lower cost than having an in-house team. Outsourcing also allows you to avoid paying for benefits like health insurance, sick days, and vacations, often included in full-time employees’ salaries.

2) Scalability

Suppose your company proliferates or plans to expand into new business areas. In that case, an outsourced CFO can help your business handle these changes more efficiently by allowing room for growth. As your company expands, so does the need for additional staff members who can take on different organizational roles. An outsourced CFO can provide this flexibility while still offering 24/7 support whenever needed.

3) Quality control

When you outsource your financial services, you don’t have to worry about losing control over critical data, such as customer information or trade secrets, because CFOs are experts in security measures, and privacy policies handle everything. This means that clients’ data will always be safe under the care of a third-party provider like us at Westport.

4) Greater efficiency

With an outsourced finance department, you won’t have to worry about keeping up with new technology or updating processes when necessary. You’ll be able to focus on core business functions instead of worrying about running an entire department.

5) More Time For Innovation and Increased Productivity

Outsourcing your finance department will allow you to focus on innovation and new technology within your industry instead of spending hours crunching numbers or analyzing financial reports. This will enable you to spend more time brainstorming ways to increase revenue and profitability while improving customer satisfaction. You’ll be able to focus on what matters most to your business while outsourcing the rest.

How can a fractional CFO help the small business owner?

Financial management through the CFO position is a crucial success factor many organizations lack. Your business plan does not need the highest-paid CFO to manage corporate structure, profit margins, and overhead costs. The financial data from accounting professionals can drive increasing market share, obtaining funding, and managing risk.

Here are a few examples of how a Fractional CFO can make running your business a little easier:n

    • Improved financial reporting accuracy through enhanced technology and internal controls
    • Support your leadership team in strategic decisions
    • Management of month-end reporting and budget analysis
    • Established plans, budgets, and models with consistent variance analysis
    • The reduced administrative strain on your accounting team
    • Improved sales results due to open communication with finance
    • Financial Planning and Analysis (FPA) without hiring an Analyst or Controller
    • Dedicated efforts to improving banking relationships and capital-raising activities
    • We coordinate tax filings with your external certified public accountant (CPA)
    • Analyzing customer acquisition costs and lifetime values
    • Performing due diligence and valuation on business acquisitions

What challenges can a fractional CFO help overcome?

You have a great business idea but lack a professional background in the finance world. Vital financial planning, risk management, and leveraging the company’s strengths support the best small business ideas.

Here are some challenges that can be solved by working closely with a chief financial officer:

  • Account debtor, cash flow issues
  • Low gross margins and improving cost of goods sold
  • Downsizing operating budgets and reducing expenses
  • Implementing new financial systems with modern technology and automation
  • Navigating audits
  • Acquisition integration
  • Inventory Management
  • Inaccurate or outdated financial statements

Fractional executives provide the support of a whole department. If your business lacks an annual plan, is scrambling to pay bills, and is diminishing business performance, outsourcing your treasury and money management team is a sound idea.

Long days outstanding (DSO) and extending customers’ credit can hurt small businesses’ cash flow. With a dedicated team, Westport Business Management regains financial control, improves cash flow, and drives bottom-line profits for its shareholders. Fractional c-suite executives advise management teams on strategic matters, financing, and corporate development.

It is common for entrepreneurs to lack a controller or CFO in-house; this is where we can help accelerate your growth. We help business owners and managers focus on sales, marketing, and operations while we handle the cash flow and financials.

Fractional CFOs: Develop a strategy, manage growth, and achieve goals

Bookkeepers, Accountants, and Controllers are mainly concerned with keeping past and current accounting documents and record keeping. A Chief Financial Officer helps plan and develop a strategic, detail-oriented plan for the future, looking out for up to 5 years. Reconciling budgets, conducting variance analyses, and evaluating financial data to identify root causes of economic issues best are how CFOs manage growth and achieve goals.

Strategy, growth, and goals require one common resource – finances or cash. To close gaps in your company, a CFO helps secure financing and sources of capital to achieve corporate goals. Without a strategy, forecast, and plans, no finance team can produce a roadmap for the future. Outsourcing finance allows businesses to focus on what they do best while still maintaining financial integrity. It saves money on salaries and benefits, which are often the most expensive aspects of running a company; it also reduces risk by allowing companies to invest in areas where they excel rather than trying to be experts in everything related to business operations.

Are you ready to speak with a fractional Chief Financial Officer?

A fractional CFO is a business owner’s best friend. It’s someone who can work closely to help manage your finances and save you time so that you can focus on the things that matter most to your company.

A full-time CFO is available 24/7, but sometimes, a business owner needs someone other than an employee to help them with financial matters. With our fractional CFO services, we provide this service without requiring any long-term commitment on your part.

Westport Business Management provides fractional CFO services to startups, rapid-growth companies, and turnaround businesses. Our network partners include experienced CFOs, CPAs, and finance leaders with the skills to help with your finance and accounting needs. We handpick and vet all of our fractional CFOs to provide elite services for your business. To speak with a CFO today, please contact us or call 800-686-3198.