What to Expect When You Hire a Fractional CFO
A fractional or outsourced chief financial officer (CFO) is an individual who has CFO experience and who helps organizations with their financial needs on a part-time basis, either on retainer or more typically a contracted basis. This is different than an interim CFO, who is typically brought in on a full-time basis for a period of time to fill a gap until the position is permanently filled.
So, what does a fractional CFO do for a company? The answer varies depending on a company’s circumstance: maybe there is a particular financial challenge such as raising capital, implementing a new accounting system, navigating a specific project like an audit or perhaps some other significant financial transaction. Oftentimes, once a fractional CFO is brought in on one specific project and is successful, he or she will be given other opportunities to help the company achieve its strategic goals.
The advantages to the company can be significant. Probably the most obvious advantage is the ability to have a seasoned veteran on the team at a fraction of what it would cost to hire a full-time equivalent. Most fractional CFOs also have experience with many different companies. This allows them to have a very unique lens to view the company through. Additionally, both the organization and the fractional CFO have the opportunity to initially work together on a limited scope and can get a sense of whether or not there is a good cultural fit for all involved.
Over time, many fractional CFOs function as an integral part of the management team, so they are involved with goal setting and strategic initiatives of the company. As they become familiar with the company’s operations, they can act on the company’s behalf with outside counsel, lending institutions and/or investors. This can free up others in the organization, like the CEO, to focus on growing the overall strategy and vision for the company.
The fractional CFO also works alongside the company’s controller and other accounting staff to ensure the company’s financial statements are in order. Many times, the fractional CFO will close the month’s books after the accounting staff have entered their data and then issue the financial statements. This adds an extra layer of oversight and can provide additional internal controls to ensure best practices are being followed.
In one of the first experiences I had in this role, I was working with a medical practice who unfortunately found themselves in the red and needed help to get their ship turned around. Within 90 days, I was able to fix some of the bottlenecks that were causing their financial and cash flow difficulties and resolved a good amount of the debt they were in. However, because of my outside perspective, I was able to see that in order for the practice to grow and flourish financially, they were actually going to need to go further in debt to get some of their operational software up-to-date. I worked alongside the owners of the practice as we navigated through these difficult times. The changes I suggested, along with giving them the time they needed to be fully implemented, allowed the practice to come out on the other side poised for success. Almost two decades later, I am happy to report that their practice remains on solid financial footing.
When a company decides they want to explore bringing a fractional CFO on board, there are many options out there to consider. I would encourage company owners and CEOs to carefully evaluate and specifically define what they want the individual to accomplish for the organization. Then go and seek the individual who can not only provide the technical information to complete the task but also melds in with the current team. It is a customizable position from a compensation standpoint as well. Fee structures can be arranged to have the fractional CFO spend fixed numbers of days or weeks in a client’s office, some arrangements are virtual, some are at a fixed fee and others retain the fractional CFO on an hourly basis. The choice is yours to make!
Not sure where to start? In addition to providing fractional CFO services, BerganKDV provides an array of business, financial and technology solutions. See what we can do for you. Start here.
ABOUT THE AUTHOR:
Gary Hawkins, Kansas City Market Leader
As Market Leader, Gary is responsible for growing overall service for the Kansas City metro market by managing all aspects of the value creation cycle and will work with the Kansas City team to ensure a wow experience is being delivered.
Gary’s background is in tax, however the work he performs goes well beyond tax compliance. Gary primarily works with professional services, real estate and construction owner-managed companies to help them build and manage their companies to help them look at all areas of the financial health of their organizations.