The chief financial officer (CFO) is a key role for many scaleups. But a full-time CFO might be too expensive for a business in its early stages. Read on and learn when & why it might be better to hire a part-time CFO.
Founders often spend years running, marketing, and managing the finances and operations of their company. But as a business grows, its needs change, and the founders will eventually need to hire experts and other leaders to help them run the business.
What Is the Role of a Fractional CFO?
A senior finance professional who oversees the strategic financial analysis startups need to succeed is known as a fractional chief financial officer. Working with a fractional CFO can provide a business with the management and insights required to manage its finances or get ready for a future funding round. Businesses can also hire a fractional CFO on an hourly, project, or subscription basis as an alternative to incurring the long-term expense of a full-time hire.
Several instances of fractional CFO services include:
- assisting in the identification and monitoring of KPIs for comprehending a company’s financial health
- predicting revenue and expenses and managing the annual budget for the business
- speculating on potential financial outcomes to help guide business strategies
- controlling a company’s spending and runway for cash
- examining vendor agreements and supplying guidance throughout negotiations
- creating and promoting fundraising plans
A fractional CFO, like a full-time CFO, can help the company’s leaders understand the importance of financial insights and metrics so they can make strategic decisions. However, a CFO typically does not perform routine bookkeeping or accounting tasks. Instead, those can be handled either internally, by an outside service provider, or a combination of both.
Reasons to Employ a Fractional CFO
Many startups profit from the advice and assistance a CFO can provide because a part-time CFO can assist in resolving specific financial objectives or problems a business may be facing. So when is the ideal time to bring on a part-time CFO? When your business needs help with:
- Rasing capital. A new funding round’s preparation period can be particularly hectic. A part-time CFO can assist founders with pitch deck preparation, financial reporting, understanding the advantages and disadvantages of various forms of funding, and investor questions.
- Managing capital. For a business to survive, managing cash flow can be essential. A part-time CFO can make suggestions for how to improve profitability and balance your cash flow.
- Forecasting your finances. The historical financial transactions of your business can be kept organized with the aid of bookkeepers and accountants. A part-time CFO uses their industry knowledge and analysis of your previous financial reports to forecast and model the future of your company.
- Implementing new financial techstacks. With long-term growth in mind, a fractional CFO can recommend tech stacks and financial management systems for you to use. Choosing the right framework now could end up saving your business time and money later.
How to Employ a Part-Time CFO
Fractional CFOs, also known as outsourced CFOs or virtual CFOs, can be employed from a firm of CFOs or as a single individual to provide CFO services. Make sure an individual or team’s experience and background align with the requirements of your company before hiring them. You might want to think about asking a potential fractional CFO the following questions:
- Have you assisted organizations with comparable objectives or difficulties as our business?
- Are you familiar with the business strategy of our company and the typical performance indicators used by our sector?
- Will you be working with us in a group setting or just us individually?
Putting Together Your Finance Team
A part-time CFO can be hired at any time. The CFO Services team at Fullstack works with numerous clients who have not yet launched or generated any revenue. A CFO can help set up your startup to succeed in any environment thanks to the flexibility of the fractional CFO engagement, whether it starts at 5 hours or goes up to 25 hours a month. They can also be there throughout the early stages of the company.As your business grows, their role will continuously change in terms of level of engagement.
Contacting a CFO now will help your company get ready for scale and position itself for success in any economic environment. To discuss CFO services and ask questions about your company’s operating & financial strategy reach out to Fullstack.