Does your company need help from a financial expert, but you can’t afford the added cost of a full-time employee? If so, working with a fractional CFO may be your best route!
What is a fractional CFO, and how can one help you?
A Fractional CFO refers to a temporary chief financial officer. Basically, it’s someone you hire part-time to give your business financial and operational support.
Being part-time doesn’t mean they’re inexperienced, however.
Fractional CFOs typically work with multiple organizations to minimize their costs. You can even partner with fractional CFO companies for project-based services!
Today, we’ll discuss everything you need to know about working with a fractional CFO firm. Read on to learn the advantages of having a part-time CFO for small businesses.
The Benefits of a Fractional CFO
There’s no doubt fractional CFO services can have many benefits for your organization. Working with one can give your business a competitive edge.
Below, we list why you should look for a Fractional CFO company to work with!
1. Cost-Effectivity
The SHRM says the total cost of hiring and onboarding can reach up to four times a person’s salary.
Compared to hiring an in-house CFO, the cost of a fractional CFO is more cost-effective. For instance, at Estmere, getting a fractional CFO starts at only $625 a month.
Rest assured that fractional CFOs can accomplish various tasks like a full-time CFO. They can do everything from cash flow management to financial analysis and planning.
To put it simply, fractional CFOs bring you all the benefits of a full-time resource at a fraction of the cost!
2. Risk Management
One of the best fractional CFO benefits is risk management. Not only will you have less financial commitment, but you also minimize risk with a fractional CFO’s scalability.
Working with a fractional CFO consulting firm gives you full access to financial experts. The best part is you can achieve this without the long-term commitment.
Fractional CFOs can be advantageous because they prevent an over-reliance on a single individual.
What’s more, like full-time CFOs, fractional CFOs help with risk management. They can identify financial risks, provide stability, and protect the business from threats.
Stakeholders and lenders will have more confidence in your business if you’re working with a reputable fractional CFO firm!
3. Flexibility
Fractional CFO services for startups are a potential key to success. Part of the reason for that is flexibility.
You can hire a fractional CFO to work only a few hours a week to minimize costs. You can also hire more fractional CFOs during critical financial periods.
A fractional CFO’s flexibility lets you choose specific projects to work on. It’s even possible to have fractional CFOs on-site or online based on your requirements!
Fractional CFOs are great for startups because you can customize and tailor their work to your growing business.
4. Financial Expertise
Fractional CFOs are just as talented and experienced as full-time finance executives.
Most fractional CFOs are retired financial executives merely seeking work-life balance. In some cases, financial experts also become fractional CFOs because they want to have a positive impact on small companies.
This means that when you hire a fractional CFO, you gain access to someone with years of experience in the industry!
Fractional CFOs have the potential to bring a wealth of knowledge to your company. You can take advantage of them and have them guide your business to success.
Fractional CFO Services You Should Look For
Working with a fractional CFO is great because it simplifies your taxes, accounting, and finances. That said, finding ones that offer the right services for your business is crucial.
Below are some fractional CFO services you should look for before hiring!
1. Budgets & Projections
Budgeting is a vital process for any business. It’s a task that can help you stay on track toward your financial goals and prevent overspending.
Your fractional CFO should help you streamline and allocate your resources. Therefore, you should look for ones that manage and control your costs.
With the right factional CFO, you can maximize your profitability and optimize your cash flow.
Our tip is to find a fractional CFO who can do the following:
- Analyze Historical Data: The fractional CFO should review your business’s financial performance. This includes checking your previous profit margins and expenses.
- Collaborate With Departments: The CFO must work with each department to get accurate projections. Doing so allows them to determine the department’s financial needs.
- Set Financial Goals: The fractional CFO will use the data to create realistic goals for your business. They should help you plan expenses, reduce costs, and allocate resources.
- Project Investments: Fractional CFOs are your partners when it comes to capital investments. They can project costs and returns on new equipment, technology, and acquisitions.
- Conduct Sensitivity Analyses: CFOs can factor in economic shifts and changes in consumer behavior. Look for one that can assess risks and prepare you for uncertainties in the future.
2. Monthly Cash Flow Forecasts
Cash flow forecasts are essential to the business because they prevent you from overspending. With a fractional CFO, you can monitor and optimize your cash flow, taking advantage of surpluses.
Having cash flow forecasts ensures your business has smooth operations!
Our tip is to find a fractional CFO who can do the following:
- Understand Inflows and Outflows: The CFO should investigate your revenue, loans, and credit. They should then compare this with your operating expenses and other expenditures.
- Create a Forecasting Model: The fractional CFO projects your available cash based on the inflows and outflows. They then build a monthly forecasting model to prepare you for unexpected fluctuations.
- Identify Cash Shortfalls: Cash flow forecasts allow you to anticipate and prevent cash shortfalls. With a fractional CFO’s guidance, you can secure short-term financing or delay expenses to overcome the shortfalls.
- Forecast Revenue: Fractional CFOs should have projections based on market conditions. They ensure your budget is enough to support the company’s growth.
- Communicate With Stakeholders: The fractional CFO must be an effective communicator. Your fractional CFO will have the task of presenting projections to your stakeholders.
3. Growth & Goal Planning
Small businesses can benefit from fractional CFOs because they can help you understand how to grow it. Fractional CFOs do this by setting actionable goals to increase profit at a fraction of the cost.
Having a fractional CFO especially comes in handy when scaling and expanding the business. Remember, you can improve your decision-making and operational efficiency with a CFO’s assistance!
Our tip is to find a fractional CFO who can do the following:
- Define Goals: The fractional CFO must work closely with you to determine realistic goals. These goals can help your business with profitability and market expansion.
- Conduct Financial Forecasting: CFOs should factor in varying growth scenarios for financial forecasting. Find one that uses a sensitivity analysis to measure your goals based on market conditions.
- Construct a Funding Strategy: Capital allocation is critical for fractional CFOs. They should be able to evaluate your funding options and give you an ROI analysis.
- Assess Risks: Fractional CFOs understand financial, economic, and operational risks. Your fractional CFO should create a framework to help you manage these risks.
- Assist in Long-Term Planning: You should consider long-term planning when hiring a fractional CFO. Your fractional CFO must be capable of supporting you as your business grows.
4. Financial Dashboards With KPIs
Studies show that measuring KPIs can positively impact your organization’s performance. Fortunately, you can get real-time insights into your company’s KPIs through dashboards.
A fractional CFO can develop and manage financial dashboards to track your progress toward meeting your goals. They should also tailor this dashboard to your business’s specific KPIs.
With a fractional CFO, you can accurately see your company’s vital information and use it to achieve success!
Our tip is to find a fractional CFO who can do the following:
- Monitor Business Performance: The CFO should give you an accurate picture of your yearly performance. They should compare sales, profits, and expenses for the same periods each year.
- Provide Current Year Drill Down: Your fractional CFO should break down how much money you’ve made and spent. They should then use this information to create monthly comparisons of sales and expenses.
- Organize Accounts Receivables: The CFO should give you an outline of your accounts receivables and payables. On top of this, they must make it easy for you to access information on any outstanding collectibles.
- Conduct Trend Analysis: Find a fractional CFO to help you spot patterns and trends. You may ask them to configure the dashboards against previous performance.
- Save Time: Having a financial dashboard gives you access to centralized information. Your CFO should provide one that increases efficiency, saves time, and boosts accountability.
How to Hire a Fractional CFO for Your Business?
Hiring a suitable fractional CFO can be difficult, especially if you’re unsure what to look for. To make it easy, here are some tips on how to hire a fractional CFO!
- Assess Your Needs: Identify specific business needs and define your challenges and goals. It helps to determine the fractional CFO’s tasks and time commitment beforehand.
- Create a Job Description: Outline the tasks and responsibilities you expect from the CFO. Be sure to specify any necessary skills and qualifications for the potential candidate.
- Find Candidates: When it comes to CFOs, the closer to your business, the better. Be sure to search for part-time CFO services near you to see what’s available.
- Reach Out: Aside from searching fractional CFOs near you, you may write directly to candidates. Do this by sending a fractional CFO engagement letter to those with the skills you need.
- Conduct Interviews: Make sure to establish rapport with the fractional CFO. You can tell whether one matches your goals by conducting an interview.
- Create a Contract: It’s also important to legally protect your business. Come up with a suitable fractional CFO contract template for your new hire.
- Monitor Performance: The fractional CFO must help you meet your financial goals. Always communicate with the fractional CFO and ensure their performance meets your standards.
Apart from this, you can quickly hire a fractional CFO by reaching out to us. Rest assured, we’re here to take the weight off your shoulders and help your business thrive!
What Is the Cost of Fractional CFO Services?
The cost of fractional CFO services can vary depending on your business’s needs. Experts say the monthly retainer fees of a fractional CFO can range from $3,000 to $10,000.
At Estmere, however, you can gain a whole financial department for your business for as little as $625 per month.
Let’s look at some of the packages available for you.
- The Deliver Package: This package includes services like Accounts Payable, Accounts Receivables, and invoicing management. You can get proactive financial reviews and bookkeeping services for as little as $625 per month.
- The Enhance Package: This package gains you segment-level visibility for only $1,650 monthly. Here, you receive strategic advisory services and unlimited support!
- The Scale Package: At $2,500 per month, the Scale Package can get you services like budgets and projections twice a year. Moreover, you can receive help with goal planning and cash flow forecasting.
You can visit our website for a more detailed overview of what each package contains!
Is a Fractional CFO Right for You?
It takes work to determine whether a particular fractional CFO business is right for you. That’s because each organization will have unique needs and goals.
To know if you need a fractional CFO, here are some factors you should consider.
- Business Size: Fractional CFOs are the most suitable for small to mid-sized businesses. A fractional CFO can provide expert advice for a company entering a new expansion phase.
- Task Complexity: You can hire fractional CFOs if you need someone to conduct more complex tasks. Fractional CFOs may be overqualified for basic bookkeeping and reporting.
- Time and Availability: Fractional CFOs work part-time. Meaning, they will have limited working hours compared to a full-time CFO.
- Internal Team Capabilities: Does your company’s internal team lack expertise? If so, bringing in a fractional CFO can bring them the guidance they need.
- Long-Term Goals: Fractional CFOs mostly work for specific projects. If a large business needs someone to provide ongoing financial leadership, an in-house CFO may be more suitable.
Overall, fractional CFOs are for businesses that need a financial professional at a fraction of the cost.
Fractional CFOs can identify financial pitfalls and help you make data-informed decisions. This means they can improve your business’s health in the long run.
If you want to gain a fresh perspective on your company’s financials, you should consider working with a fractional CFO. We recommend trying it regardless of how small the business is.Don’t worry. The good news is you don’t have to spend thousands of dollars on a fractional CFO. With Estmere, you can grow your business today with as little as $625 a month!
