Regardless of size, industry, or location, strong financial leadership is a vital component of any organization’s success. Yet, small and mid-sized companies often forgo hiring a CFO due to budgetary constraints. This is where bringing in a fractional resource can help! An outsourced fractional CFO will perform the same duties as an in-house full-time CFO, but on a more limited time basis.
For those that are not familiar with the term, “fractional leadership” covers anything that is less than full-time. That means a fractional CFO may perform ongoing accounting/finance duties for a set number of hours every week for months or even years while the company grows until it reaches a point where it has enough work to justify the cost of a full-time hire. In this way, a fractional CFO is a great steppingstone as an organization grows or undergoes significant transition. In other situations, a fractional CFO may be brought in to provide short-term business project oversight or to clean up a mess that has resulted from a major accounting issue.
So, let’s look at when a fractional CFO is an absolute must-have.The following scenarios are the most common reasons why clients bring in outsourced CFOs to help:
- Performing a Financial Analysis
When business leaders don’t know precisely where their company stands, they can bring in an outside CFO to perform a formal financial assessment. Fractional CFOs have the impartiality to thoroughly analyze the organization’s finances, processes, and procedures and make actionable recommendations. They will look for ways to improve reporting and forecasting, efficiency, risk management efforts, and growth planning. The result is an unbiased assessment of what’s working well and what needs to be improved to pave the way for future growth.
A financial assessment can be done at any stage but is most often undertaken when a major business change is occurring (like a leadership replacement) or when business results are falling short of expectations. An assessment can help offer the insights needed to build a solid foundation for business growth.
- Increasing Cash Flow
A consulting CFO is a great resource to lean on for improving cash flow. Whether the company is struggling financially or is looking for a way to accelerate growth, a fractional CFO can analyze business metrics to look for improvement opportunities. Often this will include making accounting changes across A/P and A/R to keep more cash in the business as well as identifying ways to reduce overspending and waste.
Depending on the needs of the organization, their analysis may also include suggestions on how to improve business productivity. The goal is to yield a more positive cash position for the organization without sacrificing across other areas of the business to provide a quantifiable benefit.
- Improving Processes and Procedures
So often institutional financial staff become so engrained in the organization’s existing activities that they become blind to how processes and procedures could be improved to better serve the business’s needs. This is where the “same old way of doing things” curse sets in. Often staff will lean towards what is familiar and comfortable, writing policies that are easy to maintain and justify their control over processes. However, organizational success stems from a collaborative finance team that is constantly striving to improve.
Again, because a fractional CFO is external to the inner workings of an organization, their impartiality can offer significant benefits. An outsourced CFO can help to ensure that the organization’s financial processes are focused solely on business needs and goals instead of personal desires or attitudes. They can not only offer recommendations on how to improve policies, procedures, and controls but also get them implemented and put the safeguards in place to ensure they are maintained.
- Fixing Tax Errors
Nothing is responsible for more headaches in small and mid-sized businesses than taxes. Worrying over whether taxes are being filed correctly in compliance with state and national regulations as well as uncertainty around whether all available tax credit opportunities have been utilized creates a huge mental burden on business leaders.
A fractional CFO will use industry best practices to identify compliance needs across the organization’s systems and processes. They will use that information to help companies get their house in order by putting the right pieces in place across accounting processes and systems and cleaning up their financials. Then, they will typically propose a tax specialist to take the company further with more specific tax advice.
- Offering Support to the CEO
It’s lonely at the top, but a fractional CFO can provide the camaraderie and support needed to make it seem a little less so. However, this relationship is not merely social in nature. An outsourced CFO can also be a valuable sounding board for strategic planning initiatives, providing accurate financial context to give CEO’s greater confidence in their decision-making.
Whether the role is full-time or fractional, a CFO can share the burden that CEOs bear. A fractional CFO can take critical financial responsibilities off a CEO’s plate, freeing them up to lead better with fewer distractions.
When you need a fractional CFO, please reach out to us! We offer top-rated CFO services to businesses and organizations across all industries. Find out more about how our highly experienced team of part-time CFOs can come alongside your company to do a financial analysis, improve accounting processes and procedures, fix tax errors, improve cash flow, offer c-suite support, and so much more!