There is a common misconception that early-stage startups and low-growth companies don’t really need executive financial leadership… not yet anyways. This misconception holds that hiring a Controller or CFO is something that comes later, after enough growth has occurred or growth is happening more quickly than before.

And while it’s true that it often doesn’t make sense financially for a small company to hire a full-time in-house CFO right away, the need for experienced financial leadership isn’t something that a company just graduates into once they hit a certain revenue benchmark. Strong financial oversight and leadership is something that every business needs, and many business owners simply can’t provide alongside their other duties. This is especially true when the business has more complicated financial needs like a complex capital structure, multiple revenue streams, deferred revenue, international operations, and/or seasonality, to consider.

Faced with both of these realities – that they can’t necessarily afford a Controller or CFO, and that financial oversight and leadership is important – they instead opt to hire a bookkeeper or accountant to manage their finances, hoping that will be enough for now as a stopgap until they can afford more later. However, a bookkeeper or accountant role may not be enough to do what they need done if they have more complex financial needs. And, if the business owner doesn’t have a financial background, they may not even realize there is a mismatch there to understand what they’re missing out on.

Let’s use a real-world example of what this looks like:

At the start of the year, we began working with a new client – a small business that was dealing with messy books after their previous bookkeeper dropped the ball. Their former bookkeeper was a nice guy, but he simply didn’t have the experience required to handle their more complex financial needs. There were accounting best practices for their industry that he was unaware of, key principles that he was unintentionally missing, and compliance needs going unmet. He wasn’t acting maliciously. He just didn’t know how to do the job effectively like a more experienced Controller, Finance Director, or CFO would have in the same situation. As a result, we are now working with this client to audit several years of past financial data to fix reporting, determine if tax returns need to be amended, and get better insight into their muddled cash position. When all is said and done, this process will likely take months to finish. In time, everything can be fixed, but it didn’t need to be this way! If they had just hired a fractional Controller or CFO upfront to fill the specific role they needed, they could have saved themselves this headache.

We’ve seen too many versions of this same story over the years to even count, which tells us one thing for sure – there are a lot of companies out there that need to trade up their bookkeeping/accountant for a Controller/CFO to meet their unique needs.

Now, this doesn’t necessarily mean that they should get rid of their bookkeeper or accountant altogether and look to hire or outsource a more senior role. In many instances, they should hire a fractional (part-time) Controller or CFO to offer financial leadership and oversight, taking what their lower-level bookkeeping/accounting staff are doing a step further to ensure compliance and plan effectively.

Let’s discuss when a fractional CFO is essential and what kind of benefits they can offer to companies of all sizes!

When Do You Need Fractional Help?

Fractional accounting/finance leadership is essential for companies looking to:

• Understand their overall financial position
• Increase their working cash flow
• Improve their accounting processes and procedures
• Identify and fixing tax errors
• Provide strategic support to their owner or CEO

The best time to get started with a fractional financial leader is on day one, but if you don’t bring someone in from the very beginning, getting started as early as possible will still pay off more than waiting until later on. As Gary Christianson explains,

“Financial missteps can be devastating. Whether it’s poor cash flow management, lack of proper forecasting, or insufficient investor communication, these mistakes can hinder a company’s growth or even lead to its demise. A fractional CFO offers a solution by providing the financial oversight, strategic guidance, and expertise needed to avoid these costly errors.”

> Read: When a Fractional CFO is a Must-Have <

The Benefits of Hiring a Fractional Leadership Role

The biggest benefit of bringing a fractional CFO on board is improved FP&A (financial planning and analysis) practices. Leaning on an experienced financial leader part-time allows you to harness their expertise and skillset for as much or as little time as you need to:

• Improve internal and external communications
• Increase data accuracy and reliability
• Track the right metrics that are integral to your success
• Recognize business challenges and roadblocks
• Identify and pursue market opportunities
• Turn your business goals into strategic plans
• Formulate contingency plans before you need them

All companies, regardless of size, can benefit greatly from tapping into the power of fractional financial leadership at any business stage, especially when they have more complex financial needs. In fact, smaller organizations are typically the ones that stand to gain the most from utilizing this kind of partnership because they can gain access to the kind of expertise that was once only available to larger business entities. Remember, fractional financial leadership will work with the business owner or CEO across the many facets of strategic planning in a way that will pay off substantially in the long term.

While any organization can realize these benefits, they are going to be especially salient for companies that are:

• Looking to improve profitability
• Undergoing rapid periods of growth
• Developing and launching new offerings
• Entering new markets
• Making major strategic shifts
• Facing more complex tax planning needs
• Planning for potential M&A activity

At CFO Selections we provide fractional CFO and fractional Controller solutions to organizations of all sizes. We will come alongside your existing leadership to offer as much or as little financial guidance as you need so you can run your business better! When you work with us, we will pair you with an experienced financial executive to provide strategic direction, improve your accounting systems, and help your business to scale operations as it grows. Contact us today to find out more!