The world of finance is full of jargon, not least in the titles that get bandied about all the time. Finance Managers, Financial Controllers, Heads of Finance, Management Accountants, FP&A Analysts; the list goes on. But one of the roles that is probably most misunderstood is the CFO – the Chief Financial Officer – and even more so, the fractional CFO. So this article aims to demystify what a fractional CFO is, and when you might want to engage with one.
A fractional CFO is the most senior member of the finance team, typically in a venture capital backed startup or small or medium sized enterprise (SME) who works on a part-time or on-demand basis.
A fractional CFO is a senior financial executive who provides strategic financial guidance and support to these businesses, typically working on a contract basis, offering a range of services tailored to the specific needs of their clients.
Fractional CFOs should be distinguished from interim CFOs who, whilst performing similar functions and also work on a contract basis, are normally full time in a business for a fixed period of time often covering for an existing employee who has gone on maternity or paternity leave or possibly bridging a gap whilst the company searches for a full time hire.
A fractional CFO is most appropriately brought into a business when they start to grow and need more experience in their finance team, but where the work is almost project based rather than ongoing allowing the company to gain valuable expertise without the cost of a full time hire.
Fractional CFOs can help startups with a variety of financial tasks, including:
- Developing and implementing financial plans and strategies
- Managing cash flow and forecasting
- Preparing financial statements and reports
- Analyzing financial data and providing insights
- Negotiating with lenders and investors
- Overseeing the finance operations of the business
Fractional CFOs sit within the leadership team of the business often assisting the owner or senior management to think through complex strategy, helping them to understand how they can finance the business and explaining the financial performance of the business is accessible language to assist with short and longer term decision making.
It is important to note that fractional CFOs rarely work with only one business, rather they will have a portfolio of clients whom they will work with on a regular basis. At EmergeOne, we typically work with clients anywhere between half a day to three days per week and will often work with them anywhere between 12 and 36 months depending on their ongoing requirements.
Whilst they do not work full time for, or exclusively in any one particular business, the value of a fractional CFO lies in their ability to leverage their experience, relationships and knowledge to quickly assess a business and recommend and execute solutions that will help the business grow and fulfill its long term objectives.
Finance is a transferable skill which allows fractional CFOs to use their learnings from one business or business model and use them to have a positive impact on other businesses without compromising or sharing any sensitive information between clients.
In summary, fractional CFOs can be a valuable asset for startups that do not have the resources to hire a full-time CFO. They can provide the financial expertise and guidance that startups need to make informed decisions and achieve their goals at a fraction of the cost of a full-time hire.
