When to Hire a Fractional CFO

June 14, 2023

Deciding when to hire a fractional CFO will vary for each company based on growth stages and financial needs. But if you're reading this article, chances are the right time to outsource business finances is quickly approaching (or already here).

How Does a Fractional CFO Work?

The role of a CFO is to oversee and manage a company's financial operations, including financial planning, reporting, budgeting, and cash flow management. A fractional CFO (also known as an outsourced CFO) performs these tasks on a part-time or project basis for companies that need financial guidance but can't justify the additional cost of a full-time CFO.

Fractional CFOs work independently, typically serving multiple clients simultaneously. Since their financial services are split across multiple companies, most part-time CFO services are handled remotely. Some fractional CFOs will spend certain days in the office, depending on the project.

When Should I Hire a Fractional CFO?

The decision to bring on a financial professional is not always an easy one, and there are various factors to consider before making the leap. Here are some signs that it might be time to hire a part-time Chief Financial Officer.

Funding Rounds

Raising capital can be a daunting task for startups and smaller operations. Preparing financial plans and investor pitches requires a significant amount of time and resources that may already be in short supply. Fractional CFOs have the financial expertise to navigate each stage of funding.

During Series A and B funding rounds, fractional CFOs can develop financial projections and advise management teams on how to allocate funds effectively. Their financial acumen really comes in handy for investor relations and negotiations during Series C funding (and beyond).

Rapid Growth

Growth spurts can quickly outpace cash flow and end up sinking the whole operation. Shaky finances are one of the biggest reasons why 50% of businesses fail in the first five years. A fractional financial expert can help manage scaling financial tasks while keeping costs in check.

Outsourcing CFO services before expanding can build a solid financial foundation with forecasts for future capital and potential risks. Sometimes rapid growth skips a few steps in the planning process. Fractional CFOs can step in to accelerate accounts receivable and optimize cash management.

Financial Challenges

Managing money while running a business often leads to a ledger that has more than a few missing or incorrect line items. Fractional CFOs keep track of all the moving parts of financial processes to make sure profit margins are trending in the right direction.

Companies can hire fractional CFOs to handle cash flow issues, streamline accounts, identify cost overruns, and other common financial management challenges. They can also provide support for audits by reviewing and correcting accounting statements and tax return reports.

How Do I Find a Fractional CFO?

Finding a fractional finance professional follows a process similar to other consulting services. Before bringing a fractional CFO board, consider how their industry experience aligns with your financial challenges and goals. For assistance with hiring a fractional CFO, book a free consultation with one of our finance experts.

Alyssa Huizenga
Director, Business Development
[email protected]

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