As a business owner or leader, you need financial expertise to guide and grow your business. Financial clarity and trusted counsel will help you make the best, most informed decisions.
Many rapidly growing businesses, though, don’t have a full-time chief financial officer (CFO) on staff, or the resources to offer compensation commensurate with high-level expertise. In other cases, the departure of the CFO throws the finance and accounting function into turmoil, introducing new business risks. In these scenarios, among others, a fractional CFO can be the ideal solution. In this article, we explain the role of a fractional CFO in strategic planning and financial management and share why hiring one can be one of the best business decisions you make.
What is a fractional CFO?
A fractional CFO is a part-time, outsourced CFO who provides strategic financial leadership support to a business. A fractional CFO handles financial planning and analysis, cash flow management, budgeting, financial reporting, and risk management. Often, a fractional CFO helps to professionalize or optimize a business’s finance and accounting function. In some cases, a fractional CFO will also help with capital raising, due diligence, mergers and acquisitions, business turnaround, and more. A fractional CFO works on a project, retainer, or hourly basis, which can make hiring one more affordable for companies that do not have the resources to hire a full-time CFO.
A fractional CFO’s role in strategic financial planning
A fractional CFO will work closely with you and your team to understand your financial and business goals. Then they will build a strategic financial plan for your business—and implement and manage it while tracking performance.
In strategic financial planning, a fractional CFO typically oversees:
Financial insight and analysis. A fractional CFO’s ultimate goal is to create financial clarity for more informed decision-making in your business. They assess your business’s financial health and position, analyze performance, and provide insight into the financial implications of business decisions.
Financial forecasting and modeling. A fractional CFO develops financial models and forecasts with a high degree of accuracy, including estimated revenue projections, analysis of costs and profitability, and the upsides and downsides of different strategic scenarios. These financial forecasts help to define the best path forward for your company.
Capital allocation and resource planning. A fractional CFO advises on effective allocation of financial resources, including investments, the optimal allocation of capital across projects or divisions, and calculating the potential return on investment of projects and initiatives. They can help a business owner prioritize initiatives or investments based on which are most financially viable and strategically important.
Risk management and mitigation. A fractional CFO identifies potential risks, including market volatility, regulatory compliance and changes, mergers and acquisitions and more, and helps to define strategies to mitigate these risks.
Financial strategy development. A fractional CFO works closely with a business owner and executive team to create and execute a firm’s financial strategy. This includes aligning financial, business, and strategic goals, defining financial targets and metrics, and developing a roadmap to achieve these targets.
Performance monitoring and reporting. A fractional CFO tracks performance of the organization by monitoring key financial indicators and trends and providing insights—and regularly updates the executive team and other stakeholders.
Hiring a fractional CFO can help you ensure that your business has a financially sound strategic plan aligned with your business goals—and that it is making progress toward those goals.
The benefits of a fractional CFO
A fractional CFO can help your business in many ways, from improving financial performance to navigating significant change or disruption, raising capital, and much more. The benefits of a fractional CFO over a full-time CFO include:
- Affordability: Typically, fractional CFOs work on a part-time or project basis. This can often be a more cost-effective way to bring on the strategic financial expertise of a seasoned leader without incurring the salary, benefit, and overhead costs of hiring a full-time CFO.
- Better financial management. Fractional CFOs provide insights and guidance for many areas of business, including cash flow management, budgeting, financial planning, and performance monitoring, ultimately helping your business improve financial performance.
- Flexibility. Depending on what your business needs and how a specific fractional CFO works, the engagement can be tailored to provide guidance during a growth phase, while navigating the departure of a financial leader or CFO, or while evaluating a merger, acquisition, or capital-raising phase.
- Objective perspective. By virtue of their position as an outsourced CFO, they can bring an unbiased lens when providing advice on critically important decisions. This independent viewpoint can be especially important during highly stressful or emotionally charged decisions.
- Credibility. Having seasoned financial leadership on board can help boost your company’s credibility with investors, lenders, and potential partners, which can make it easier to access capital and other growth opportunities.
A fractional CFO can help improve strategic financial planning with strong financial leadership and accurate reporting.
When you’re ready to explore hiring a fractional CFO, we can help. Marren Consulting supports privately held businesses with strong financial leadership and accurate, relevant reporting—helping business owners and leaders identify opportunities to improve performance, unlock growth, and achieve their firm’s full potential. Learn more at https://www.marrenconsulting.com.