Everything to know about Fractional CFOs
27
Sep
Blogs

Everything to Know About Fractional CFOs

Posted on by Mustafa Mohsin

Is it worth hiring a fractional CFO?

The tumultuous business landscape has left businesses struggling to survive and thrive, bringing to the forefront a wide range of complex financial and managerial challenges. What businesses need now more than ever is financial leadership. 

Someone has to be the pillar holding the business’ financial foundation together. For corporations, it’s, of course, the Chief Financial Officer. A role that is, at times, even more vital in a business than the CEO., A CFO is the navigator who can get businesses out of the murky waters and into clear skies. 

For most businesses, however, a CFO is nothing more than a dream. Even large corporations today do not have full-time CFOs. Turning to Tim Spihlman, an expert from Lewis and Clarke’s Holdings, less than 1% of US businesses have a full-time CFO on their payroll as of 2023. There are several reasons why this is the case, but the dominant reason seems to be the simplest one: CFOs are just too expensive. 

It’s true. As of September 2023, hiring a full-time CFO will leave your wallet with $356,573 annually, not including benefits. The cost has been steadily climbing as the months go by, and even major corporations have begun restructuring their finance teams to make do without such an overpriced resource. 

Not to say that CFOs are asking for more than they are worth. Rather, the economy is so brutal that almost every skilled professional asks for a higher salary. Hence, businesses must choose between what they need and can do without. 

There is, however, a solution to this problem that has garnered quite a bit of attention as of late: Fractional CFOs.

All about fractional part time CFO

What is a Fractional CFO?

Fractional CFOs are frankly an ingenious solution to the CFO dilemma. If a full-time CFO is too costly, why not hire a part-time one? 

Some businesses typically do not need the service of a full-time CFO. Sometimes, businesses may require a CFO’s services to ask for advice on a specific project or a financial strategy. Hence, this is where the services of a fractional CFO come in handy. Business leaders are free to hire them only when it is required. 

According to Clutch, 37% of businesses outsource their accounting to remote professionals. So why not do the same for your CFO? By hiring a remote professional CFO, you can lose very little and gain much more. Such as:

The Advantages of Hiring a Fractional CFO

  • Cost-Savings

They charge a fraction of what a full-time CFO in the US asks for, and if Expertise Accelerated’s fractional CFO services are any indicator, businesses stand to save up to 60% on payroll costs. All of this without any drop in accounting, management, and leadership quality. 

  • Flexible Approach-  Hire Only When Needed

Fractional CFOs are highly flexible. You may only need the services of a CFO during audit season or when seeking external funding. Or during a particularly difficult business quarter. Regardless of the reason, a fractional CFO is someone who you can retain and let go at your discretion. You can arrange for them to work with your business for a certain period and part ways after it’s done. Hiring a full-time CFO is only justified for the top 0.1% of US businesses. Everyone else can get by just fine with a fractional CFO covering their needs when required.

  • Expertise and Wide Industry Experience

Fractional CFOs are treasure troves of knowledge and industry wisdom. Given the contractual nature of their job, seasoned fractional CFOs have experienced the whole gamut of financial situations businesses can find themselves in, and this knowledge is an invaluable asset to leverage for decision-making and strategizing. 

  • Risk Mitigation

Fractional CFOs also bring a measure of security and risk mitigation that cannot be understated. Financial controllers are unimaginably important for businesses, and fractional CFOs can play the role perfectly, ensuring that all the books are accurate and sincere. EA publication “A Guide to Cyber Risk Management in Business Accounting” is a great supplemental read for businesses worried about risk management.

A Step-by-Step Guide to Hiring the Ideal Fractional CFO 

As with any business engagement, your experience with fractional CFOs depends greatly on how you hire one. Our experts have created a step-by-step guide to finding your business’s perfect CFO. From basic preparations to finalizing the contract, let’s uncover the secrets of fractional CFO hiring together!

Define Your Needs

The self-assessment phase is the first rung on the ladder to your ideal CFO. In this case, it is assessing the needs and wants of your business. Just like you don’t go to the market without a grocery list of things you need to buy, you can’t go headhunting for fractional CFOs without defining what you need from them. Answering these simple questions should prove helpful in pinning down your exact requirements for your ideal CFO:

  • Why are you searching for a fractional CFO?
  • What specific services do you expect your fractional CFO to render?
  • What is your budget for this endeavor?
  • Do you need someone with experience in your specific industry?

Of course, there are many more questions than where those came from, but you get the point. Use those as a stepping stone to start building your game plan for what you will be looking for from your fractional CFO.

Knowing Where to Look

It’s easy to say you’re shopping for a fractional CFO, but do you know where the market is? 

Normally, businesses tend to go the usual route of posting jobs on sites like LinkedIn and Indeed. This is fine, but asking fractional CFOs to come to you is way less efficient than going searching yourself. This is where you have to make a choice. You can visit forums like Upwork, where fractional CFO talent is freely available. Or, you can consult an outsourced accounting firm to hire a fractional CFO. 

We recommend the latter for two big reasons. Firstly, an accounting firm is far more trustworthy than a remote professional on Upwork. You can always hold the firm responsible and seek recourse if something goes wrong. While a freelancer is someone who you can fully depend on and trust without incurring risk. 

The second reason is that, in general, an accounting firm is far more likely to be able to introduce you to a pool of fractional CFOs that meet your specific criteria. You may want a fractional CFO who is highly experienced in the CPG sector and familiar with New York legality. Asking for something like that in the freelance market is like looking for a needle in a haystack. An outsourced accounting firm, on the other hand, has contacts. By nature of the firm’s work, they will have access to professionals in a wide range of industries and localities, which makes your search far less stressful. 

Research Time!

After you have decided on a place to look, it’s time to put in the elbow grease and research. This is your finance function at stake, after all. You cannot just handle anyone as your fractional CFO. Be especially careful among freelancers because many scammers will sell you on airy promises and fail to deliver. If you’re opting for an outsourced accounting firm to help you, then start investigating which firms are the most trusted by your industry peers. There are usually a few household names that everybody knows and trusts, which is a great place to start. If you see a new firm that seems promising but is relatively unknown, look at their reviews and call the reviewers. Look at business licenses and permits; add them to the list if everything is good.

Interviews and Making the Deal

This is the part where you are on your own. You need to think about everything you came up with in the first step and see if the candidates can meet your expectations. This part is largely improvisation, and there’s no real point in trying to make a rigid plan for an interview. Take it as a free-flowing conversation and test the knowledge of the candidate. Maybe present them with some hypotheticals to see how they react. Having a rough outline of questions is also a good idea. Other than that, the ball is in your court here, and once you have decided on your ideal fractional CFO, it’s time to make the deal.

While lawyers will handle the nitty-gritty of the deal, the important points to define beforehand are contract duration, payment terms, non-solicitation clauses, and the like. Read the contract carefully and have it reviewed by your lawyer before signing off. Besides that, it should be smooth sailing. Good Luck!

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