The latest trend in the C-suite is the fractional CXO.
This trend is highly beneficial to small and medium-sized businesses because it offers access for SMBs to high-level advisory on a part-time basis and at a fraction of the cost.
A fractional CXO differs from a consultant in that a fractional CXO takes an ongoing interest in the business they are working with and has an active leadership and management role within that business.
What is a fractional CFO?
A fractional Chief Financial Officer (CFO) is a CFO available to advise and guide businesses part-time. You pay a fraction of the cost of hiring a full-time CFO and still get the accounting and financial guidance and strategy that a full-time CFO offers.
Hiring a fractional CFO is an excellent solution for small to medium-sized businesses (SMBs) who need growth strategy and financial guidance when they can’t afford to bring one in the company full-time.
How can a fractional CFO help my business?
When you want to grow your business, you need a plan that maps out the steps to achieve the growth without putting your company at risk. Not all business growth is created equally and for some businesses to grow too quickly puts a strain on cash flow.
Cash flow is vital for business survival.
Some ways a fractional CFO can help you in your small to medium-sized business:
- Financial modelling
Projecting growth through scenario analysis is an informative way to make business decisions.
2. Strategic growth
Having a one-year operating forecast is smart financial and growth planning that gives direction to your business for the upcoming year.
3. Overseeing of the accounting function
Having that high-level supervision for your accounting team that can guide them and answer questions they need is valuable for your team.
4. Monthly financial reporting
Meeting with your CFO a minimum of once per month to review its financial position and identify any problems before they become significant issues will help the business succeed.
5. Variance analysis
Monitoring your monthly progress against your goals is vital for knowing how your business performs. Having financial goals is essential for your business but knowing if your business reaches them or not is critical.
6. KPI monitoring
Monitoring the key performance indicators (KPIs) of your business will help you measure the performance of your business. Having stated goals for your KPIs to ensure they stay fluent will help prevent problems, and money sucks in your business.
7. Trend analysis
Much valuable information can come from trend analysis and helps with accurate planning in the business.
8. Capital raise
When you are raising money for your business, knowing your business numbers is vital to a successful raise. A fractional CFO can coach and guide you to ensure a successful raise.
9. Cash management
As cash is the lifeline of a business, having a reliable system to manage cash will help relieve any financial stress of knowing when bills are due and if there is enough money to cover them.
10. Risk management
Intelligent business management is wise to identify risks that threaten the business and protect your business against those risks.
How do I know my business is ready for a fractional CFO?
When your business has grown, and you need a trusted advisor to help take you from multiple six-figure incomes to seven figures and beyond, adding a fractional CFO to your team will be beneficial.
CFOs are hired to maximize profit in a business and optimize growth strategies. CFOs offer high-level expertise and valuable guidance and advice to get your business as profitable as it can be while strategizing for growth.
What to look for in a fractional CFO
Hiring the right CFO in your business is vital. You want a CFO who is a leader and will work with you, the company’s CEO, as a partner.
The most important skills to look for in a fractional CFO:
- Strong communication skills
You want to partner with someone who will communicate clearly and thoughtfully. Having an aligned business relationship is essential to making the arrangement work.
2. Experience
You want your fractional CFO to have at least ten years of experience with experience in your industry.
3. Education
Professionally designated CFOs are a good indicator that they are well prepared and able to take on the responsibility of a fractional CFO.
When looking for a qualified CFO, you can start by asking around your network. Maybe some colleagues have worked with a fractional CFO and have been very happy with their work and are willing to refer. Referrals are the best way to bring on new talent.
Meet with at least three potential candidates and get a feel of how they work and what would be the best fit for your business. Building a good rapport with your fractional CFO is essential for a good working relationship.
Where do I find a qualified fractional CFO?
Melissa Houston, CPA, CGA is the founder of The Fractional CFO Agency as well as the founder of The Business Society™️ blog and podcast.
