What Services Do Fractional CFOs Provide?

5 min read

January 12, 2024

Most business leaders are accustomed to outsourcing non-core aspects of their businesses to third-party providers. For example, hiring a marketing agency, law firm, or bookkeeper to assist with these non-central aspects of running a successful business is commonplace.

While it's common knowledge that outsourcing non-core business functions to experienced and educated professionals outside of your company is both a money-saving strategy and a boon to business, fewer business leaders consider the possibility of outsourcing a more central position, a position in the C-suite. 

However, outsourcing the position of chief financial officer is becoming increasingly popular. The demand for fractional CFOs up 103% year-over-year in 2023.

The growth in the industry should not be surprising, as an outsourced C-suite position can save businesses hundreds of thousands of dollars annually, afford them access to some of the most experienced professionals in the industry, and help businesses through periods of challenge and growth.

What Is a Fractional CFO?

Fractional CFOs (also known as outsourced, interim, or hourly CFOs) are financial professionals who fill the role and handle the traditional responsibilities of a chief financial officer. However, instead of working as a full-time, salaried employee in a business's C-suite, a fractional CFO provides services as a third-party provider, either as an independent contractor or as a part of an outsourced financial management firm.

This means that the services of a fractional CFO are often paid for hourly, with a flat-rate fee, or through a subscription. Not only are these expenses considered business expenses and tax-deductible, but they are almost always substantially less than the cost of covering an in-house CFO's salary and benefits. (The average annual salary of a CFO in the United States rings in at just over $435,000, by the way.)

Read More: How Much Should Mid-Market Companies Pay For Outsourced CFO Services?

What Does a Fractional CFO Do? Top Services Provided by Fractional CFOs

CFOs are responsible for financial management and planning, and outsourced CFOs fill the same role and handle the same responsibilities. The roles and responsibilities of a CFO can vary slightly depending on whether or not a business also has an individual filling the position of controller. If there is no controller in place, then the CFO's responsibilities will deal with both practical, day-to-day financial management in addition to and visionary, strategic planning. If the company does have a controller overseeing daily oversight of bookkeeping and accounting, then the CFO will be more completely focused on strategic financial management. 

Some of the top services provided by fractional CFOs include the following:

1. Bookkeeping and Accounting Systems

If your company lacks an experienced controller, then an outsourced CFO will establish efficient, sound, and compliant bookkeeping and accounting procedures. These systems and procedures will be established to help mitigate risk, facilitate the accurate, thorough, and timely collection of financial data, and ensure efficient financial reporting. 

2. Financial Management and Analysis

Outsourced CFOs use expert financial data analysis to improve the management of your business with better cash flow forecasting and management in addition to cost understanding and reduction, profit maximization, and improved operational efficiency. 

3. Financial Strategy and Planning

An outsourced CFO works closely with a business's CEO to develop a financial strategy that is designed to overcome challenges, leverage opportunities, and support the CEO's future vision for the company. 

4. Capital Management and Fundraising

CFOs specialize in helping businesses achieve growth by raising capital in strategically savvy ways. 

Read More: What's the Difference Between a Financial Controller and a CFO?

5. Audit Preparation and Management

A fractional CFO ensures that a business is always ready for an audit in addition to helping manage and navigate any financial audits that occur. 

6. Oversight of Major Transitions

Whether expanding, merging, undergoing an acquisition, or transitioning ownership with an exit, an outsourced CFO can provide stability throughout major transitions such as these. 

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7. Goal Setting, Operating Frameworks, and Organization-Wide Alignment

While the CEO is primarily responsible for providing the vision that informs the company's direction and propels forward momentum, a CFO must provide a financial framework designed to support the CEO's operating framework. With goals and benchmarks set by the CEO, the CFO can establish systems of measurement and performance evaluation to ensure that the entire organization is aligned around those goals and that appropriate financial resources have been allocated to support the operation. 

8. Objective, Experienced Perspective and Guidance

A CFO's responsibility is to provide a financially informed perspective in the leadership and management of a business. An outsourced CFO brings this to the table in addition to an objective, outsider's perspective. This allows business leaders to see their businesses with fresh eyes, identify opportunities or problems that might have been overlooked, and leverage creative solutions to challenges. 

Does Your SME Need a Fractional CFO? What to Look for in an Outsourced CFO

From startup to exit planning, businesses can benefit from the services of a fractional CFO at any stage. When choosing an outsourced CFO to work with your business, use the same careful discernment you would if you were hiring an in-house employee. Look for someone with experience in your industry and good communication skills in addition to a willingness and enthusiasm to understand your business, its challenges, and its goals.