Things To Think About With Fractional CFOs: How To Decide if You Need One and Questions to Ask Potential Hires

Business Strategies
8 min
Nov 14, 2022

You understand the importance of a Chief Financial Officer (CFO) for big businesses after all, they handle past, present, and future finances and business strategies when most big business owners just don’t have the time to do it. 

But as a startup or small business, you’re just not sure you need a full-time CFO onboard — or maybe you just can’t afford one. 

So, how do you help your business meet its goals and improve strategies without making a long-term commitment? 

Let us introduce you to fractional CFOs. 

Whether you need help implementing financial strategies, improving your business’ financial wellness, are looking for industry expertise in negotiations, or anything related to your business finances you’ll benefit from hiring a fractional CFO. Read on to learn more. 

What Is a Fractional CFO? 

Fractional CFOs (Chief Financial Advisors) are a part-time alternative to full-time CFOs. Think of fractional CFOs as freelance financial professionals who you can contract for your business. 

They still offer similar services as regular CFOs, but don’t require the long-term commitment, salary, or benefits of a full-time employee. Instead, they work on a part-time, or project, basis. 

Their duties typically only involve specific aspects of certain projects. So they are specifically hired to tune into — and assist with — particular financial challenges or goals. They provide direction and financial accountability and can lead your team in the right direction toward your goals. 

When To Hire a Fractional CFO

So, how do business owners know when it’s the right time to hire a fractional CFO? If you’re a startup company that can’t afford to onboard a full-time CFO or need to be financially focused, but require …

  • Help growing profitability and sustainability as your business continues to grow
  • Knowledge about building financial systems 
  • Assistance in putting proper financial processes in place

… hiring a fractional CFO is likely your best option. 

A fractional CFO can help with …

  • Creating or improving cash flow management
  • Raising capital 
  • Streamlining internal processes
  • Increasing profitability
  • Developing budgets and processes for long-term success
  • Navigating audits
  • And more

Continue reading to learn just how hiring a fractional CFO can benefit your business in these ways. 

Is Hiring a Fractional CFO a Good Idea? 6 Ways a Fractional CFO Can Help Your Business

#1: Managing Finances

A fractional CFO can help your business analyze your financial data. By providing expertise in accounting and finance, they can provide vital information regarding your business’s profitability. 

Fractional CFOs can help your business establish a solid financial foundation. They can help you prepare for growth by ensuring your finances are in order and can sustain the continued growth your business aims to achieve. 

They may also help your business position its cash, recognize where your budget could be improved, and suggest ways to streamline your budget and operations. 

#2: Raising Capital

Fractional CFOs play an integral role in raising capital — which every business needs if they’re going to continue expanding. Whether that means assisting in valuing your company, or speaking with investors and handling any necessary paperwork, your fractional CFO becomes an absolute asset. 

Your fractional CFO can also help you identify blind spots in your company and get your team to look at different angles of financial decisions that must be made. 

#3: Supporting Growth

Growth must be managed meticulously. An expert fractional CFO already knows that a business growing too fast comes with risks. 

Let your CFO guide you through how to manage the stage your business is in and ensure there is enough capital to support your growth. 

#4: Implementing Systems

Requirements are constantly changing, especially as your business begins to scale. 

A fractional CFO can help you predict what could go wrong and put systems in place to correct them before they do. They can create a system that runs smoothly and doesn’t disrupt your existing workflows. 

#5: Performing Internal Audits

Audits are intimidating for businesses big and small. 

Having an expert on your side to offer advice and assist you during an audit can reduce the fear and anxiety often associated with them. Consider hiring a fractional CFO to function for you — let them answer any questions auditors might have. 

#6: Handling Negotiations 

Deals, mergers and acquisitions, bank loan terms — all of these things require the knowledge of a finance specialist. 

A fractional CFO can assist you in negotiating bank loan terms and provide you with information on what financial leverage you have and what terms could potentially hurt your business. 

4 Advantages of Hiring Fractional CFOs

#1: Lower Costs

By hiring a fractional CFO, you still get the expertise and service of a “full-time” CFO, but typically at a much lower cost. Instead of handling things at a larger scale, fractional COFs can perform specific duties on the schedule, and budget, you require.

#2: Advanced Decision Making 

Fractional CFOs can help businesses make decisions based on accurate and up-to-date information, allowing business owners to avoid making costly mistakes or decisions. These decisions may involve growth strategies, cost management, staffing, business finances, and more. 

#3: Enhanced Trust 

Having a professional CFO as part of your team, even as a part-time member, can help your business build trust with key stakeholders — especially if you are seeking investments, debt financing, or selling a company. 

#4: Increased Productivity

Let your fractional CFO take care of the financial aspects of your business so you can get back to doing what you do best — running your business. 

5 Questions To Ask a Fractional CFO Before Hiring

#1: What Industries Do You Specialize In?

Knowing your potential CFO has experience in your industry — or similar industry — is vital. You want a CFO that knows about how things work in your niche. 

But that doesn’t mean your industry has to be the only industry they have experience in. 

CFOs who have worked in multiple industries (and chosen a specialty) likely have more insights into operational changes that can be made, as well as experiences they can apply from one industry to the next. 

The end goal? 

Find out what your potential hire knows about your industry, while also determining if their experience elsewhere can help your business thrive. 

#2: What Type of Timeline Can I Expect?

Before signing any contracts, make sure you have a clear understanding of what you expect from your CFO and what they expect from you. 

What definite deliverables are there? What timeline is necessary to meet your needs? What’s their approach to working with you? 

Is there anything that could disrupt the amount of time it will take for your fractional CFO to meet your expectations? 

#3: Do You Have References?

Recommendations go a long way. If your fractional CFO is hesitant to provide contact information to previous employers or doesn’t have a track record — you may want to rethink your decision to hire them. 

Does the potential hire have references from your industry? An expert fractional CFO should have several clients who can vouch for their services and success. 

Additionally, when determining if a fractional CFO is a good fit for your business, consider asking for, or discussing, case studies from your industry — or similar projects. This will give you an idea of how they would approach (or have approached) a similar situation. 

#4: What Are Your Qualifications for This Position?

A fractional CFO should have experience in: 

  • Accounting
  • Finance 
  • Business management 
  • Working with ERP systems
  • Similar industries

#5: What Is Your Fee Structure? 

Depending on the project, some fractional CFOs may be required to spend specific days or weeks in the office. Others may be virtual or remote. 

Does your fractional CFO charge on an hourly or per-project basis? Be sure to discuss all conditions during the hiring process to avoid any unresolved issues at the end of a project. 

Fractional CFO vs. Full-Time CFO: Which One Is Best for Your Business Needs?

If your business just can’t afford another salaried member of your financial team — or you’re not convinced that a full-time CFO is quite what you need — a fractional CFO may cover all your financial bases. 

Fractional CFOs offer the same knowledge and experience as many full-time CFOs but are generally hired on an as-needed or per-project basis. They can offer high-quality, tailored solutions your team can integrate into your business strategy as needed. 

And, instead of having to worry about paying or letting go a CFO, fractional CFOs can be hired as needed. 

If you’re not ready for a long-term commitment, hiring a fractional CFO can end up saving your business money in more ways than one.