Why Companies Are Switching to Fractional CFOs

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In the past, companies hired full-time Chief Financial Officers for in-house accounting. While some businesses assume it’s still necessary to have C-level professionals to handle financial needs, many businesses are switching to fractional CFOs. This new trend to outsource financial assistance allows companies to utilize professional accounting help at a fraction of the cost. With professional and specialized budgeting advisement and cost savings from outsourcing, this practice maximizes business efficiency and funds. 

Why and When Companies Make the Switch

For small businesses and industries that require specialized financial expertise, hiring a fractional CFO is a way to gain access to financial resources previously only available to large corporations who could afford in-house CFOs. However, outsourcing financial assistance provides benefits to small and large companies alike.

Cost Efficiency

Fractional CFOs are more cost-effective than full-time experts for most businesses. Hourly rates mean businesses only pay for what they need. In addition, outsourcing means that on-site employees do not have to dedicate time and resources to economic affairs that are irrelevant to their position. Many companies who make the switch find that they can allot their time and money more efficiently. 

Expanded Talent Pool

Thanks to the Digital Age and the ability for CFOs to work remotely, the talent pool of economic advisors has expanded. Companies are not restricted to local candidates. As a result, they have more fractional CFOs to choose from, including specialized CFOs. This is critical for businesses in financially complex industries that require specialized accounting knowledge and experience. 

Strategic Budgeting

Fractional CFOs are also a strategic option for small businesses. They help with annual and monthly budgeting, actual analysis, negotiating debt, tax filings, forecasting, analyzing customer acquisition, and other functions that, in the past, were only available from full-time CFOs. By switching to fractional CFOs, smaller firms save money that would have been spent on a full-time officer, and their CEOs and employees save time and energy by handing off economic processes. 

Stability for Startups and Transitional Periods

Startups also benefit from hiring fractional CFOs. New businesses have changing needs and are more prone to unpredictable circumstances than established companies. Fractional CFOs can help structure initial systems and processes for enterprises that are still evolving. 

Similar to startups, businesses that are experiencing a transitional period find that fractional CFOs can make major company shifts easier to endure. If your company’s being acquired, then you can bring on a fractional CFO to assess your firm’s financial value and also make sure the transition goes smoothly. Then you can let them go once the acquisition is complete. Whether the company is growing or taking on new leadership, part-time CFOs can identify necessary steps to transition the company smoothly. 

Organized Leadership

Outsourcing financial help also takes the weight off of company leadership to handle economic affairs. CEOs and Executive Directors can dedicate more time to leading when they hire a fractional CFO to take over budgeting and analysis. 

Qualities of Effective Fractional CFOs

A fractional CFO acts as an advisor and business partner to the CEO, Executive Directors, or owner of the company. There are a few characteristics of a part-time CFO that companies look for to make this partnership worthwhile.

Communicative Between Partners

Even if he or she works remotely, a good fractional CFO should be able to educate and inform the CEO about the company’s financial situation and prospects. That entails not only preparing financial statements but interpreting them, as well. They should be able to translate financial data and explain its trends and significance to leadership and employees in a way that can be easily understood. With strong communication, CFOs can provide effective end-to-end integration of financial knowledge.

Valuable to the Businesses

Like full-time CFOs, part-time officers should have the capacity to improve a business’s processes and expand their network. Hiring a fractional CFO is worthwhile so long as they are able to streamline the economic structure and processes of a company. Despite being an hourly employee, fractional CFOs should be able to provide the same value as an in-house CFO, just at a lower cost. 

How Companies Make the Most of Off-Site Financial Professionals

Fractional CFOs work fewer hours and often remote, so it’s crucial to optimize this part-time partnership. Companies that utilize fractional CFOs most effectively adopt these practices.

  • They embrace tools, apps, and online platforms.
  • They transfer financial data to the cloud. 

First of all, it’s cheaper to store information via the cloud than on-site servers. Plus, it’s easier to access accounting data and coordinate information flow via cloud-based platforms. 

  • They find new ways to virtually communicate. 

Many companies maximize efficiency with chat apps. They are quicker and require less formality than email, so many companies find that messaging platforms make coordinating projects easier. Video conferences have also become more popular, and since video technology is more reliable than ever before, it’s easy for companies to conduct business “face to face.”

Hiring a fractional CFO can provide specialized and industry-specific financial expertise to a company at a reasonable cost. Furthermore, with digital technology, it’s easier than ever before to outsource financial management to save companies both time and money. Companies who make the switch optimize economic processes and even save money while doing so. 

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