Do You Need A Fractional CFO?

Here’s a checklist and explanation to help you decide whether your business needs a fractional CFO or CFO services

Sam Patel, Associate Director at Graphite

Updated 2022

In this article, we will discuss what a fractional CFO is, is a fractional CFO worth it, and how much a fractional CFO can cost.

Being an entrepreneur or a startup owner, one of your standout challenges is the financial side of running your company. Most founders aren’t accountants or finance-focused, and having to analyze your company’s financial situation, pitch investors, and strategize for future growth takes time and resources. Time and resources that would otherwise be better spent on running and growing your startup!

At a time when hiring a full-time Chief Financial Officer might not be a cost-effective decision for you, what do you do? Especially when it is apparent your company needs pro financial insights to make rational business decisions to sustain and scale its profitability.

This is where a fractional CFO comes in. Below, we will discuss what a fraction CFO is, is a fractional CFO worth it, and how much a fractional CFO can cost.

 

What is A Fractional CFO?

As the title implies, a fractional CFO is an experienced Chief Financial Officer providing strategic financial services for startups in a freelance, retainer, or part-time contractual arrangement. Aka they offer you a fraction of their work time. A fractional CFO offers businesses the expertise and experience of a top-notch CFO without the usual in-house cost in salaries, bonuses, and benefits that hiring a full-time CFO would accrue.

While a full-time, in-house Chief Financial Officer controls and sustains the company’s general financial strategy, a fractional CFO is usually contracted on a project basis, focusing on specific company challenges or goals. 

 

What Does A Fractional CFO Do?

Essentially, a fractional CFO performs the same functions as a full-time CFO. However, these functions might vary depending on a specific company’s challenges and goals at the time of need. A fractional CFO can handle everything from financial modeling (we have a free financial model template if you’d like to try it!), fundraising, treasury, board and investor reporting, and strategizing the direction and growth of the business.

They can be responsible for testing your company’s strategy and providing clarity for financially solid plans. With business growth comes the complexity of established financial processes, which becomes more difficult for company’s founders to manage using just an accountant. There comes a need for an experienced expert skilled at seeing the big picture and ensuring plans for financial growth are accurate and achievable.

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A fractional CFO, through broader expertise, handles the creation of critical financial infrastructure and solves a company’s specific financial challenges. Here are some of the expert services a fractional CFO can offer your company:

  • Accounting: A fractional CFO works out the numbers and supervises the core processes and results of the accounting arm of the company.
  • Financial Analysis: A fractional CFO oversees the company’s financial analysis ranging from cash flow analysis, customer and product profitability, evaluating an acquisition target’s financial strength, etc.
  • Financial Planning: A fractional CFO’s skills include the expert development of financial plans, including creating annual plans or longer-term strategic plans to attract investors.
  • Financial Reporting: A fractional CFO can develop the financial metrics and KPIs (Key Performance Indicators) for a company. These numbers are geared towards catalyzing a push towards desired actions and outcomes.

 

Why Hire a Fractional CFO?

Forward-thinking founders consider enlisting the expertise of fractional CFOs for varying reasons. Here are some of the many reasons your company needs a fractional CFO onboard:

  • Fundraising support.
  • Support building a financial model.
  • General advisory while developing and executing their business model/plans.
  • You need an accounting and finance expert to lay the blueprint for developing financial systems to mitigate risks and achieve growth and profitability goals.
  • You are too swamped with product/service delivery to perform accounting and bookkeeping as a founder.
  • Market and financial forecasting have become very complex and stressful.
  • Your business is expanding, and you need help managing and sustaining profitable growth.
  • You are pursuing vertical integrations or looking to enter new markets.
  • You are making some changes to your business plans and are uncertain about the potential results.
  • You are looking to bring on new equity partners or investors.
  • You need financial expertise but don’t have the resources to hire a full-time CFO.
  • Your business growth is limited with resources tied up in inventory etc.
  • You are considering acquiring or merging another company.
  • You need to replace a member of your company’s accounting and finance arm.
  • You are considering getting new debt to refinancing.

Benefits of Hiring a Fractional CFO

Essentially, hiring the services of a fractional CFO allows all forward-thinking businesses to enjoy the strategic benefits larger organizations have, boasting in their ranks the presence of highly skilled, in-house financial expert, but on a fractional, cost-effective basis.

Businesses tap into this strategic expertise until they grow large enough to justify hiring a full-time, in-house CFO. Some of the key benefits of hiring of fractional CFO include:

  • Advanced Decision Making: Businesses can make strategic decisions based on expert financial information and insights to mitigate risks and costly eventualities and drive desired results—these decisions include business financing, cost management, growth strategies, staffing, etc.
  • Improved Financial Data: An expert fractional CFO would provide businesses with accurate and up-to-date financial data and management reports to promote proactive growth management. This data include forecasts, cash flow projections, actual results vs. projections, and other KPIs. 
  • Productivity Improvement: Contracting a fractional CFO allows founders to focus on the business’s product/service delivery end, helping improve productivity.
  • Stakeholder Trust: Stakeholders typically react positively, knowing a pro-CFO is a part of a business’s management team. This bodes well for debt financing, investment rounds, or a company sale positioning.

Conclusion

The bottom line is that an experienced CFO’s expertise is a valuable and needed asset to the accounting and finance arm of your business.

Regardless of your company’s stage, funding, or revenue, businesses have financial needs. Contracting fractional CFO services with expertise in all the critical functions of a healthy and scalable accounting infrastructure will supercharge your accounting and finance department to drive results cost-effectively. It would be best to find a professional with proven industry expertise you can trust implicitly.

Graphite is a team of outsourced CFOs and accountants with a vast understanding of startup finance and accounting. We specialize in high-growth companies, overseeing business accounting and finance, from strategic projects to managing entire finance teams. We partner with forward-thinking businesses, from seed to exit, helping illustrate the big financial picture. Feel free to reach out to us (below). We’d love to learn about what you’re working on!

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Born out of a VC fund, Graphite fully understands the strategic and financial needs of high growth companies. If you need accounting support or simply have a question about accounting at your company, feel free to connect with us!

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