5 Things a Fractional CFO Should Do to Add Value to Your Business

by Corey Philip //  November 20, 2022

Does your business require the financial expertise of a CFO but cannot afford to appoint one full-time?

You may have the vision to grow your business or restructure. This is where a Fractional CFO would help. Fractional CFOs are experienced CFOs who offer their services part-time or on contract to companies that need it.

But what should they do to add value to your business?

There are five services that a Fractional CFO should provide to your business to add value. These five services include strategic financial planning, budgeting and forecasting, obtaining funding, optimizing business processes, and managing business growth.

Fractional CFOs’ diverse experience in different industries gives them specific skills that are difficult to find elsewhere. As they are not permanently part of the company, the Fractional CFOs often notice issues that management is blind to.

There are many things that a Fractional CFO can do for your business. However, there are five things a Fractional CFO can do for your business that the company's accountants might not be able to. These five things would really add value to the business.

Let’s get started.

1. Strategic Financial Planning

Strategic financial planning involves having a vision of where the company wants to go financially, not just planning for where it is currently. With the help of professional accountants, management can plan for the day-to-day financial operations of the business. However, accountants don't usually have the strategic vision of an experienced CFO, which makes a Fractional CFO invaluable.

A strategic financial vision is essential for business success and growth. The Fractional CFO will utilize the company's resources in such a way that it will not just keep the company going but also to achieve its long-term strategic goals.

Remember: The Fractional CFO would plan the company's finances in such a way that it would maximize the return on investment in the long run.

2. Budgeting and Forecasting

The company's budget should always speak to the company's strategic objectives. The budget usually is more short-term than the strategic plan. Still, it must always look to the future and be compiled before the start of the relevant financial period. The Fractional CFO's role would be to convert the strategic financial objective into measurable goals which will come together in the budget.

The Fractional CFO will also do regular financial forecasting, based on actual results to date and economic trends, to measure the likelihood of the company reaching its objectives. Where forecasts lean in the wrong direction, the Fractional CFO would implement changes to get the company's finances back on track.

Whether or not the company can achieve its strategic objectives depends on the involvement of the Fractional CFO. The Fractional CFO must have a hands-on approach to budgeting and forecasting. Variances must be picked up early so that timeous changes can be proposed to management and implemented.

3. Assist Management in Raising Capital

Any company would need additional capital injections from time to time, especially during growth. Although the owners and managers of a business might have access to funding for its immediate financial needs, they often lack the skills to utilize these funds effectively. When more capital is needed, they often don’t know who to turn to.

One of the Fractional CFO's biggest tasks is to assist management in raising capital when needed. The fractional CFO is a specialist in the field and typically has an extensive network of contacts that can assist the company in raising funds. The Fractional CFO can also help management analyze lenders' offerings to ensure the best possible terms.

First, the Fractional CFO would help the company determine its financial needs in line with the company's strategic financial planning before connecting the company with the best source of such funding. Once the capital has been raised, the Fractional CFO will assist management with utilizing such funds, ensuring the highest possible return on investment.

4. Optimize Internal Processes

Internal financial processes are vital for the timeous availability of accurate financial information. Where methods are ineffective, it would not only influence the usability of the financial information but also open the company to serious financial risks. Some processes might even be unproductive, making poor use of the business's human resources, which could be costly.

One of the Fractional CFO's tasks would be to study existing internal processes to identify areas where these processes need to be improved. He then needs to make changes to the existing procedures to make them more effective. In some cases, the Fractional CFO might even need to put processes in place where none existed to avoid unnecessary risks.

The Fractional CFO's wealth of experience in different companies and industries will enable them to see loopholes and vacuums in the processes. They can then optimize systems and procedures to ensure higher productivity and lower risk, all while keeping the costs as low as possible.

5. Manage the Company's Growth

As many businesses start small, they often don't have a need to appoint a CFO. Most small businesses would also not be able to afford a CFO. (Related: The Best Small Business Podcasts for Entrepreneurs and SMB Owners)

However, the need to hire more skilled staff members and specialists will become evident as the company grows. At some point during its growth, a business might see the need for a CFO, which is where the Fractional CFO is beneficial.

Businesses need funding to grow. If a company has insufficient funding to help it grow, it could lead to its demise. An experienced Fractional CFO will be able to assess the needs of the business. He would further ensure sufficient funding is available to take on new markets and strategies to grow the business.

Working with management, the fractional CFO will set up a growth plan for the business. This plan will indicate where and when the company is to expand. It would also tell when funding would be needed and where it would be obtained.

Managing the business' growth, the Fractional CFO will also ensure that the growth plan comes to fruition. He will regularly measure the growth according to specific set targets to ensure that targets are met. Having an experienced Fractional CFO in your corner will ensure the successful growth of your business.

Final Thoughts

Ultimately, the value a CFO offers a business depends on his or her expertise and experience. Additionally, the value you get from your CFO can be maximized if you find one with strong c-suite/operational expertise compatible with your industry, stage of growth, and company goals.

(Related Article: Best Project Accounting Practices to Stay on Budget)

About the author

Corey Philip

Corey Philip is a small business owner / investor with a focus on home service businesses.

{"email":"Email address invalid","url":"Website address invalid","required":"Required field missing"}