The truth is, even with incredibly accurate cash flow forecasting and a hefty financial cushion, companies aren’t immune to unforeseen economic dives. Natural disasters that destroy company property, worldwide pandemics that skew the axis of the market, and unexpected expenses that drain the company bank account happen. For cases like these especially, many companies can benefit from fractional CFO services: part time CFO services that handle financial planning, tracking and forecasting cash flow, and proposing corrective action for financial weaknesses on a project to project basis. In fact, there are many reasons to hire a fractional CFO: the financial side of running a business is a common challenge for small business owners, entrepreneurs and startup companies alike.
What is a Fractional CFO?
First, let’s define CFO. A chief financial officer, or CFO, is a senior executive that manages the financial operations of a company. They are responsible for tracking cash flow, financial planning, and correcting flaws in the company’s financial strategy.
A fractional CFO provides the same expert services, but in a part-time, retainer, or contract arrangement. There are several advantages to hiring a fractional CFO in place of a full-time CFO: for the same level of expertise and industry knowledge as a high-end CFO, companies can hire a fractional CFO for a financial analysis specifically aimed at solving their company’s unique challenges. Companies can resolve debts, build a robust emergency fund, and create the financial infrastructure that supports the company’s ability to grow and scale.
Why Hire Fractional CFO Services?
There are many reasons small and midsize businesses benefit from project-based or part-time professional financial strategy. If you own company, you might decide to hire fractional CFO services because:
- You are pivoting your business plan and need advice to financially adapt to an uncertain market shift
- You are too busy to perform bookkeeping and accounting
- You don’t have the financial literacy to effectively manage the business’s finances
- Your company’s cash is tied up in inventory or receivables
- You need help with a special project such as budgeting and forecasting
- You aren’t hitting financial goals as expected
- You don’t have the funds to hire a full-time CFO
Hiring a fractional CFO is a preventative measure that protects against financial slip ups. This is especially enticing to businesses with uneven or limited cash flow – and it comes at a fraction of the cost of a full-time CFO.
Who Needs Fractional CFO Services?
1) Small Companies
Fractional CFO services are accessible to small companies – even family businesses. Often, smaller businesses reach a point in their growth where they require financial expertise but can’t afford to hire someone full-time. Fractional CFOs are the solution here! They are paid for by the hour, their benefits are covered by the CFO firm or company they work for, and they often work remotely. Thanks to cloud-based bookkeeping, fractional CFOs are available anytime and anywhere. They can be an immense asset to the financial growth of a small business.
2) Companies that need an unbiased and informed financial strategy
A CFOs primary concern is the company’s long-term financial health and all the relevant maneuvers the company must make to get there. They are highly educated on this topic and have often spent years studying trends in the industry. Because CFOs prioritize data-driven decisions with an eye on the long-term, they are the ultimate unbiased source of financial knowledge – sometimes, financial knowledge that you don’t want to hear.
It’s important that CFOs help operating peers understand the implications of their decisions for the whole company. Companies in limbo can often hold staunchly to the “way that things have always been done,” but this is a limiting viewpoint. CFOs can be the bridge between financial literacy and company priorities, helping their peers understand the implications of financial decisions for the company as a whole. This unbiased perspective is often the catalyzing shift for long-established but stagnant businesses.
3) Companies looking to solve specific financial challenges
It’s much easier to ignore the possibility of one-off, chance events that result in financial catastrophe. After all, startups often struggle for funds to cover the basic operations of their business. Building up an emergency cushion can get pushed further and further back on the to-do list, which puts companies at risk when a sudden change flips the market.
In the case of a financial setback, a fractional CFO’s strategic vision can help realign the company’s financial track towards a healthy future. Some specific challenges that a CFO can help navigate are:
- Divorce. A family-owned business could face disruptions due to divorce.
- Injury or disability of key executive. Does one key executive hold all of the expertise or data necessary to operate the business? Is there a plan in case they become incapacitated and unable to work?
- Loss of a large client or customer. If the majority of your revenue comes from one major client, losing them could amass significant losses.
- New government regulations or taxes. Some government regulations might benefit your business, but others may have unexpected effects.
- Death. Lack of a continuity plan if a company founder or majority owner dies can lead to the downfall of a company.
- New government regulations. Some government regulations are favorable to businesses, others can be detrimental.
- Sudden financial hardship. Does the company have access to lenders for emergency liquidity? Does the cash management plan allow for setbacks and emergencies?
To sum it all up, fractional CFO services bring the strategic know-how and skill of a traditional CFO, but for a more affordable price. They can be brought on for a project-to-project basis, to navigate a specific financial crisis, to lay the groundwork for a solid financial strategy, or for a multitude of other situations that require specialized financial knowledge. Most importantly, the company founders or CEOs can allocate financial duties to a trusted and certified expert, and thus free themselves to focus on other vital aspects of the business.
Fractional CFO Services – Find help now!
Want to know more about how outsourcing accounting and bookkeeping services can save you money? Contact us at Unalp CPA – we’ll be happy to answer any of your questions. You can give us a call at (925) 574-8855.