The Benefits of a Fractional CFO

By Cheryl L. Mucha, CPA, CFO Your Way – September 16, 2021
The Benefits of a Fractional CFO

When a company is not yet ready to bring on a full-time chief financial officer (CFO), a fractional CFO can be a great solution. A fractional CFO is a longer-term, part-time member of the team. This financial professional (or firm) is generally contracted on an outsourced basis, made easier today through cloud-based bookkeeping and team collaboration software. The fractional CFO may work on premises, remotely or a combination of both, depending on the company’s needs. As a part timer with set hours and days appropriated to the orga­nization, this individual may be working for several other clients at the same time.

Why a Fractional CFO?

There are many small and midsize businesses that are ready to benefit from the expertise of a seasoned finance and accounting professional but do not want to take on the cost of a full-time CFO. Companies of this size, which are maturing, likely have a bookkeeper on staff and may even have a corporate accountant or an accounting department. However, the timing or need for a full-time CFO may not be right for a variety of reasons.

As companies grow, corporate accounting becomes more complex and, with it, the need for more sophisticated financial inter­pretation increases. Additionally, a CFO takes a 360-degree view of the organization — financially and operationally — and uses the numbers to create meaningful projections to guide the business toward a sustainable future.

Strong Support to the C-Suite

A CFO offers advisement and expertise in the financial and operational areas of a business and may have specific knowledge and experience in certain industries or types of companies.

Beyond budgeting, forecasting, monthly or annual financial analyses, and tax filing assistance, a fractional CFO offers strong support to corporate accountants and the C-suite through vital, sophisticated services including the following:

  • Implementing or upgrading the accounting system
  • Interpreting the numbers to identify profit centers and opportunities for cost savings or revenue enhancement
  • Building cash flow models to help with planning
  • Gleaning key performance indicators from financial data to guide leadership decisions
  • Advising on capital market activities that may affect the company
  • Positioning the company for a merger or acquisition, attracting equity partners or raising outside capital, or restructuring or refinancing debt
  • Performing due diligence and valuations on business transactions or acquisitions
  • Preparing the company to enter a new market or expand its vertical integration
  • Providing leadership and direction to the organization and support to upper management that aligns with corporate goals to improve profitability, build market share and nurture growth
  • Developing strategies for corporate reinvestment
  • Ensuring that the company’s standard operating procedures adhere to best industry practices, support corporate goals and provide the necessary guidelines in all departments
  • Serving in an advisory role to the C-suite
  • Reviewing contracts, such as insurance, lease or service agreements

Selecting the Best Match

While many companies will do well with a generalist, certain industries do require a fractional CFO with experience and knowledge in their area due to financial complexities, such as real estate, logistics (e.g., distribution, warehousing, trans­portation) and manufacturing.

Other companies may need a fractional CFO with expertise in specific functions: go-to-market strategies, M&A matters, debt negotiation, brand expansion, international business/subsidiaries, or succession planning and exit strategies.

In addition, this person will be in the role of trusted advisor; therefore, the fractional CFO must mesh well personally and professionally with corporate culture, leadership and staff. Communication and leadership style are important soft-skill factors to consider when matching the right person to the company.

Bringing on a full-time CFO is an important business decision. However, using a fractional CFO is an option that can be an excellent transition step — or may be the ideal long-term solution.

Cheryl L. Mucha

Cheryl L. Mucha, CPA, is the owner of CFO Your Way LLC, which creates pathways to profitability for growing local businesses with its outsourced accounting services.

This article appeared in the Fall 2021 issue of New Jersey CPA magazine. Read the full issue.