What is a Fractional CFO?

What is a fractional CFO and what exactly do they do? Should you hire one? Keep reading – we’ll answer these questions and more.

By: Courtney Elder

Startup founders often have a mental list of the people they need to hire in order to get their business moving ahead as quickly as possible, yet some internal positions may not hold as much weight as others. Those in the tech space likely have their sights set on a range of personnel that needs to join the team on a full-time basis, but what about someone to help with back-office functions?

Many times, companies in the early stages of growth will turn to a fractional CFO so they can receive the benefits of a financial guru without necessarily having to shoulder the burden of a full-time employee. What is a fractional CFO and what exactly do they do? Should you hire one? Keep reading – we’ll answer these questions and more.

Do You Really Need A CFO?

Unless you have a deep understanding of bookkeeping strategies, there’s a good chance that you’re not going to be able to spend the time required to really get your company on track financially. There’s so much more involved with the finances of a startup, not only due to your day to day inflow and outflow of cash, but because you need to consider fundraising, runway projections, and much more.

Sometimes a founder will turn to an accountant to help ease the burden of simple financial tasks, but it’s important to remember that CFO responsibilities are different and distinct. While they may be helpful in reviewing your transactional history and helping you to understand where your money has been, only a chief financial officer can help to paint a picture of where your money is going.

Comparing Your Options

Most new companies can easily see the benefits that a CFO brings to their organization, but how would a fractional CFO differ? Let’s think about it from the perspective of both expense and value:

Traditional CFO Services

A full-time, or what you may call a more traditional, CFO is a huge part of a company’s team, not only by devoting his or her full attention to future financial projections but also through managing cash flow and determining ways in which certain business decisions will affect the bottom line as a whole. Most startups find immense benefit from having a CFO on board, but keep in mind that their services often come with a hefty price tag. Although their expertise is devoted to you for at least 40 hours a week, some newer companies simply don’t have the money to support them for long.

Fractional CFO Services

Just as the name entails, this type of CFO works for you a fraction of the time. Many people term them as part-time CFOs and they often work under contract or require a retainer. While a fractional CFO still offers the same level of value to your group, he or she won’t be working side by side with you on a regular basis. For those who don’t yet have the cash flow but still need help figuring out their financial logistics, a fractional CFO might be a great option. It’s crucial that you partner with someone who sees your vision and has your company’s best interests in mind as this will help them to hit the ground running that much faster.

Even More Ways To Benefit

For more well-established organizations that may already have a CFO in place, a fractional CFO can still provide a benefit. If you’re going through a transitional period in your business, looking to cut expenses, or are trying to navigate an audit, a fractional CFO can serve as an advisor of sorts. What’s more, no matter the reason you bring this type of role to your table, you won’t have to incur the expenses that come along with medical benefits, 401k plans, and more as they work on a contractual basis.

Hiring a CFO, even in a temporary capacity, can be a difficult step to navigate, but imagine how much harder things will be down the line if you don’t have a financial plan in place now. Startups looking to work with a fractional CFO can find all the support they need from airCFO, as our team works to make sure that your startup is set up for success. We not only make sure that you have a full understanding of your current financial picture but work to make your future goals a reality!