More than 30.2 million small businesses are operating in the United States alone as we speak. Competition is fierce as more than half of those businesses will be out of operation within a year.
One trend that continues to grow in popularity for small businesses trying to scale is the hiring of the fractional CFO.
In this article, we’ll tell you everything you need to know about a fractional CFO and if it’s right for your business.
Let’s dive in.
What Is a Fractional CFO?
Although all businesses are different, every single one has one thing in common — they must invest, create, and earn. At its core, every business relies on a cash-in cash-out cycle.
The CFO, or Chief Financial Officer, is the core leader of what keeps the finance thriving so that the business can continue to move forward. However, many startups and small businesses don’t have enough money to hire another C-suite member for their payroll.
This is why many of them turn to fractional CFOs.
A fractional CFO is like a freelancer that lends their financial experience to a startup on a contractual basis. They typically have previous CFO-level experience, but help startups on a short-term basis.
Often fractional CFOs work with more than one startup at a time.
What Does a Fractional CFO Do for Small Businesses?
Fractional CFOs’ responsibilities depend on the business and industry that they are working for, but they do have some common jobs. Let’s take a look at a few of them.
Manage Business Finances
This is the main job of a CFO. As startups begin to expand, their financial processes often become too complex and time-consuming for founders to take care of alone. The CFO is responsible for coming in and looking at the bigger picture and taking care of the financial reporting and accounting.
Think of the fractional CFO as someone who can clear a path through the numbers and statistics to simplify the financial planning for the founder.
An outsourced CFO is a vital part of formulating strategies and optimizing financial services for a startup. They can draw from their C-Suite experience and bring a fresh outside perspective to the business’s plans.
An important part of bringing in CFO services is to have them test your strategy to see if it is financially viable. Bringing in an outside pair of eyes is a great way to optimize your plan.
As startups continue to grow and scale, they need better systems to manage the growth. This requires guidance and supervision from someone who has experience implementing systems in different situations.
By bringing in someone with experience, they can help predict issues before they happen. This means that your business can continue to grow without any glitches or disruptions to your current workflow.
Growing a business always requires more capital. A CFO can take on many responsibilities that can help facilitate this, like reaching out to new potential investors and taking care of any due diligence and paperwork.
Navigate Audits and Transactions
A necessary part of business growth is internal audits to make sure that the company is financially healthy. In some cases, they are even mandatory by law. This involves:
- Inspections of cash flow
- Purchasing systems
Audits are very complex and detailed. Most new business owners and first-time entrepreneurs don’t have the experience to navigate an audit successfully.
A fractional CFO can take lead on audits and delegate responsibilities to the right people to take care of the task.
Advantages of Hiring a Fractional CFO
There are several reasons why startups are continuing to rely on fractional CFOs. Let’s look at a few benefits.
Startups are not often flush with cash and need to be very conscious about what they spend every dollar on. Fractional CFOs are a great tool for businesses that are looking to save as much as possible.
They receive all of the benefits and experience of a typical CFO without the added cost of having a C-suite executive on the payroll.
Fractional CFOs are typically seasoned veterans who have already spent years leading organizations from an executive position. This means that hiring a fractional CFO allows you to receive the vision and experience that comes with someone who has spent many years in the industry.
Another benefit is that fractional CFOs typically handle several different companies from different industries, giving them a wider diversity of experience compared to others.
A problem that businesses can run into is being stuck with people in leadership positions that run into inevitable differences in ethics, vision, or business philosophy.
Having friction at the top of the company can lead to a disruption in business focus, or worse. With a fractional CFO, it’s like hiring a freelancer. Founders can easily move on if they don’t like the fit.
Nowadays, it is even common to hire a virtual CFO that can meet the needs of your business, wherever they are.
Once you hire a fractional CFO, they can come in a start solving issues immediately. This allows founders to focus more on other important tasks, like raising capital or managing an acquisition.
Hire a CFO for Your Business Today
Hiring a fractional CFO can be a game-changer for startups that are small to medium-sized businesses.
A good CFO will be able to take a huge load off your plate and help your business find new opportunities to grow. If your business is going through a time of change and growth, a fractional CFO might be just what you need.
If you’re ready to find a CFO to help you keep more cash in your business and maximize deductions, get a free consultation with us today!