The Benefits of a Fractional CFO

BY CHERYL L. MUCHA, CPA, CFO YOUR WAY

When a company is not yet ready to bring on a full-time chief financial officer (CFO), a fractional CFO can be a great solution. A fractional CFO is a longer-term, part-time member of the team. This financial professional (or firm) is generally contracted on an outsourced basis, made easier today through cloud-based bookkeeping and team collaboration software. The fractional CFO may work on premises, remotely or a combination of both, depending on the company’s needs. As a part timer with set hours and days appropriated to the organization, this individual may be working for several other clients at the same time.

WHY A FRACTIONAL CFO?

There are many small and midsize businesses that are ready to benefit from the expertise of a seasoned finance and accounting professional but do not want to take on the cost of a full-time CFO. Companies of this size, which are maturing, likely have a bookkeeper on staff and may even have a corporate accountant or an accounting department. However, the timing or need for a full-time CFO may not be right for a variety of reasons.

As companies grow, corporate accounting becomes more complex and, with it, the need for more sophisticated financial interpretation increases. Additionally, a CFO takes a 360-degree view of the organization — financially and operationally — and uses the numbers to create meaningful projections to guide the business toward a sustainable future.

STRONG SUPPORT TO THE C-SUITE

A CFO offers advisement and expertise in the financial and operational areas of a business and may have specific knowledge and experience in certain industries or types of companies.

Beyond budgeting, forecasting, monthly or annual financial analyses, and tax filing assistance, a fractional CFO offers strong support to corporate accountants and the C-suite through vital, sophisticated services including the following:

* Implementing or upgrading the accounting system

* Interpreting the numbers to identify profit centers and opportunities for cost savings or revenue enhancement

* Building cash flow models to help with planning

* Gleaning key performance indicators from financial data to guide leadership decisions

* Advising on capital market activities that may affect the company

* Positioning the company for a merger or acquisition, attracting equity partners or raising outside capital, or restructuring or refinancing debt

* Performing due diligence and valuations on business transactions or acquisitions

*Preparing the company to enter a new market or expand its vertical integration

* Providing leadership and direction to the organization and support to upper management that aligns with corporate goals to improve profitability, build market share and nurture growth

* Developing strategies for corporate reinvestment

* Ensuring that the company’s standard operating procedures adhere to best industry practices, support corporate goals and provide the necessary guidelines in all departments

* Serving in an advisory role to the C-suite

* Reviewing contracts, such as insurance, lease or service agreements

SELECTING THE BEST MATCH

While many companies will do well with a generalist, certain industries do require a fractional CFO with experience and knowledge in their area due to financial complexities, such as real estate, logistics (e.g., distribution, warehousing, transportation) and manufacturing.

Other companies may need a fractional CFO with expertise in specific functions: go-to-market strategies, M&A matters, debt negotiation, brand expansion, international business/subsidiaries, or succession planning and exit strategies.

In addition, this person will be in the role of trusted advisor; therefore, the fractional CFO must mesh well personally and professionally with corporate culture, leadership and staff. Communication and leadership style are important soft-skill factors to consider when matching the right person to the company.

Bringing on a full-time CFO is an important business decision. However, using a fractional CFO is an option that can be an excellent transition step — or may be the ideal long-term solution.

Cheryl L. Mucha, CPA, is the owner of CFO Your Way LLC. She can be reached at cheryl@cfoyourway.com or 973-897-0650.