The role of the CFO has evolved over time to be an important part of the executive leadership team. They are responsible for guiding companies with their financial decisions and reporting on how they are doing. A Fractional CFO is a new way to bring senior-level finance knowledge into smaller businesses without having to hire someone full-time or use expensive consulting. They would be able to help companies make better decisions, help with managing cash-flows, and provide guidance on growth strategies. They will function as an extension to your existing finance department or run completely autonomously depending on the needs of the clients.
A fractional CFO is an individual who serves as the chief financial officer of a company on a part-time basis. A fractional CFO will work with smaller companies or divisions. They oversee all business activities related to finance, including day-to-day accounting operations, and issuing company reports before they are presented to stakeholders.
Fractional CFOs are paid on an hourly basis and can expect to spend up to 20 hours per week working on company finances. The job is mostly virtual, allowing them the freedom to work remotely or during non-traditional business hours without requiring them to be present in an office every day of the week.
Fractional CFOs are often experienced financial professionals, including accountants and financial managers who have been practicing in the field for several years. They possess strong department management skills as well as a solid understanding of overall business operations so they can provide insight into potential problems or opportunities related to company finances. The specific duties performed by a fractional CFO are exclusively administrative, including financial reporting, budgeting, and bookkeeping.
While the role of a fractional CFO is like that of their full-time counterparts, there are some subtle differences. One main difference lies in the fact that if a company does not have enough work to support having a full-time CFO or cannot afford the CFO’s full pay package a fractional CFO will be the best alternative until business improves to justify hiring a full-time CFO. In addition, there are events and times when a fractional CFO is justified. For example, the current CFO is too busy in their normal duties to personally manage a major short-term project or an acquisition or lacks the experience to properly handle the project or assimilate the acquired company, then having a seasoned fractional CFO will be critical during this time and once completed the fractional CFO can be transitioned out.
But because there is an increased demand for financial oversight in small companies, many fractional CFOs find themselves providing this oversight to multiple clients at once. This can lead to increased responsibility compared with someone who works full-time in the same position and may require varied qualifications and experiences before a candidate is hired.
A fractional CFO might also be given bonuses or incentives by their client companies, including cash rewards or commission based on revenues achieved. In addition to compensation from monthly fees paid by their clients, they can also earn money working on a contract basis for specific projects or by performing consulting services.
Most small companies are likely to hire a qualified financial professional for their fractional CFO role based on experience but may also require that they have specific licenses related to finance or accounting. While there are some financial consulting firms that offer services in this area, many fractional CFOs collaborate directly with the company in which they are serving.