The average base salary of a full-time CFO in the United States is well into the six-figure range, not to mention additional employee-related costs for recruitment fees, payroll tax, benefits, bonuses, etc. Training and development of financial staff may be a challenge for many organizations as well. A newly-hired CFO, especially if from a more corporate background, may be more experienced at running a financial function than at building one. With all of that in mind, for many small and mid-market businesses, this cost and effort can be hard to justify. Especially if the resource may not be fit for purpose and isn’t even needed on a daily basis.
Yet, at the same time, your business needs to grow. An expert who can be onboarded quickly and has a comprehensive knowledge of the financial workings of a company and how to build and develop a financial function can be tremendously beneficial to your business. Most companies don’t need a full-time, in-house CFO until the company grows to $75-150M of revenue or more, and so an experienced, outsourced, part-time resource (or team of resources) can be an excellent solution for many companies that need to professionalize their Accounting/Finance department.
A part-time CFO, often called a fractional CFO, brings the same value as a full-time CFO but at a fraction of the cost. A fractional CFO does not mean the knowledge or expertise is less! In fact, many fractional CFOs have extensive financial insight from past roles and experiences that they bring with them in order to help your company. But you only deploy them for whatever fraction of a full-time role is truly required for you.
There are many reasons why a business should hire a fractional CFO:
1. A Fractional CFO Helps to Establish Effective and Efficient Routines for Your Financial Function
Does your business wait until the end of the year to put together and review financial statements? While this is common, waiting until Q4 means you may be missing out on important insights that could help your business catch challenges, pinpoint strong points, and be better prepared to meet year-end goals.
Frequent and accurate financial statements (the balance sheet, income statement, and cash flow statement) are fundamental to achieving your strategic objectives. These reports work together to tell the story of your business’s health, performance, and trajectory. A fractional CFO has the expertise to create these documents and interpret them so you can make sound and strategic decisions for your business. All the time, when actually needed, and not months after the fact when it may well be too late.
2. Looking Ahead, Not Just Behind: Financial Planning, Modeling, and Forecasting
Planning for your business’s future can be more effective with a clear understanding of your financial picture. A fractional CFO can help with this by developing high-quality financial models and comprehensive financial forecasting to support and drive your decision-making.
A fractional CFO draws on years of expertise to transform raw financial data into action plans and road maps for high-quality, well-informed decisions. For example, if your company aims to grow by 10% by the end of next year, a fractional CFO can analyze and recommend how your business can cover the costs needed to fuel that growth while perhaps also helping you to improve your profit margins at the same time. It’s hard to make it to where you want to be if you’re always looking backward, and while understanding your historical results is very important, it is not by itself sufficient to help you map out plans and achieve your goals.
Effective financial forecasting is vital for making strategic decisions. Read more about Financial Forecasting with our blog post: Gaining Visibility of Your Numbers – The Crucial Role of Financial Forecasting.
3. Optimize Cash Flow and Profitability
If you are in business, it’s hard to achieve and sustain success if you don’t know and understand your cash flow: the money that comes into your business and the money that goes out. And it’s hard to grow profits if you don’t really understand which parts of your business are driving you forward or holding you back.
If your revenue is increasing but your profits are stagnating, or if you are making money on an accrual basis (“on paper”) but running short on cash, it may be a sign of a cash management and/or profit optimization issue. Many factors come into play in determining the cash flow and profitability of your business, such as cost management, pricing strategy, operational efficiency, invoicing terms, cash collection, and revenue growth, to name a few. To pinpoint the issue, you need visibility of your business’s cash flow and a true understanding of why your business is or is not profitable.
A fractional CFO can first develop a detailed 13-week cash forecast for your business and help you anticipate cash crunches or times when cash is likely to accumulate to a level that allows for more growth. They can then take a deeper look at your business’s cash flow to identify bottlenecks and develop cash flow management strategies based on your business’s financial data to increase and optimize cash flow. They can also help you to evaluate your business by client, service, or location so that you know and understand which part of your business is performing. Or not.
4. Strategic Decision-Making and Risk Management
Fractional CFOs are accomplished specialists who have gained valuable insights across various industries and business scenarios. Your business can leverage this knowledge and experience whether you’re facing financial obstacles or needing strategic plans for the future.
- Data-driven decision-making
- Management of cost structure
- Pitching to investors and bank lenders
- Anticipating and mitigating financial risk
- Identifying new opportunities for expansion or growth
Strategic financial planning is essential to the future success of your company. However, it can be time-consuming and requires expertise that you may not have or may not have in-house. This is where a fractional CFO steps in. This individual is committed to helping you assess opportunities and threats – and develop an achievable strategic plan for how best to address them.
5. On-Demand Financial Vision & Expertise
Fractional CFOs are financial experts with years of real-world experience helping guide companies through various challenges and successes. When you bring a fractional CFO on board, they provide on-demand support for you and your executive team. This guidance helps you make strategic decisions to drive effective business growth.
They work on an “as-needed” basis, making their roles flexible, scalable, and affordable. For example, if you’re preparing for the holiday season and want to optimize your financial forecasting, a fractional CFO can provide valuable support. They can help you identify strategies to increase profitability during this busy period. During slower seasons, they can work fewer hours while working on longer-term improvement projects for your company.
A fractional CFO can provide additional guidance if your company needs support with month-end operations. This ensures accuracy in transactions, budgeting, and planning. If your business is preparing to pitch to potential investors, a fractional CFO can prepare detailed reports. This enables your business to present financial projections based on historical or trending data.
How We Can Help – Fractional CFO Services
If you are ready to explore specific ways a fractional CFO can add value to your company, Sabre Financial Group can help. Our fractional CFO services for small and middle-market businesses offer high-quality, cost-effective financial guidance tailored to your needs. With this support, your business can access expert insights whenever needed, regardless of your industry. From financial forecasting to strategic decision-making, we tailor our services based on your financial needs and goals.
Contact our team to schedule a consultation today.