Research from The Wall Street Journal shows that 37 CFOs resigned from S&P 500 companies in 2020, increasing 27.6% from the previous year. This significant increase in CFO turnover could be related to the rise of fractional CFOs, as companies may opt for the flexibility and cost-effectiveness they facilitate.
Furthermore, the economic uncertainty and disruption caused by the pandemic led to an increased need for financial expertise and guidance, which they can also provide.
What is a fractional CFO?
A fractional CFO is a financial professional who works on a part-time or project basis, providing financial management and strategic planning services to businesses.
This type of CFO is typically an experienced professional with a background in finance, accounting, and business management. They work closely with a company's management team to provide financial guidance and support, helping to drive growth and profitability.
There are various types of fractional CFO, each with a distinct skillset and set of duties. Among the most prevalent examples are:
- Part-time fractional CFO: CFOs can sometimes be recruited on a part-time basis and may work a few days or hours each week. They give regular financial assistance and advice to the business but do not work full-time hours.
- Project-based fractional CFO: Focusing on specific situations, CFOs are often recruited for particular initiatives, such as a merger or acquisition, a fundraising round, or a financial reorganisation. They devote a certain amount of time to the project in the form of financial project management before moving on to another assignment elsewhere.
- Virtual fractional CFO: Many CFOs may supply their services to organisations while working remotely. As they do not need office space or perks, they are often more cost-effective than employing a full-time or part-time equivalent.
- Interim fractional CFO: Sometimes CFOs are only required to cover a temporary leadership need, such as during a period of transition or while a company searches for a permanent CFO. They give short-term financial leadership and direction.
- Outsourced fractional CFO: These CFOs are generally employed by businesses that lack a CFO or want to augment the work of an existing CFO. They provide extensive financial services, such as financial planning and analysis, financial reporting, and budgeting.
Overall, all types of fractional CFO provide the following benefits:
Proactive planning and more consistent cash flow
Utilising a fractional CFO's services may assist in maintaining a consistent cash flow for your company by giving accurate projections and determining the existence of possible financial hazards.
Analysing the company's financial statements
They may also provide significant value to your business by analysing financial statements and detecting any immediate problems. Frequently, sophisticated financial processes at large companies need specialised financial experience and support.
A fractional CFO can give this knowledge and assistance, enabling the organisation to make better-informed choices and uncover development prospects.
Collaborative problem solving
A fractional Chief Financial Officer may work directly with you to discover and solve problems and give useful insights into critical financial KPIs.
Diminish overall business risks
More often than other businesses, large companies may be exposed to several financial challenges, including regulatory compliance and economic downturns. A fractional CFO can assist the organisation in managing these risks and implementing methods to mitigate them.
Since these financial professionals often have experience working with several organisations in various sectors, they can provide a high level of specialised knowledge and experience to the large enterprises they serve.
Who might need a fractional CFO?
There are several reasons a business might need a fractional CFO, and not solely small businesses. Their expertise can be particularly beneficial for enterprise or large-scale companies.
In all cases, the size of an enterprise (and where it is in its growth cycle) will have an impact on its financial requirements.
Some of the most common reasons for an enterprise-sized organisation needing a fractional CFO include:
Company mergers & acquisitions
Enterprises undergoing mergers or acquisitions may need additional support from a fractional CFO to help navigate the financial complexities of these transactions. This is because they can provide expertise in areas such as financial due diligence, integration planning, and post-merger financial management.
Additional support for the board of directors
Enterprises may also benefit from the additional support a fractional CFO can bring to their board of directors. They can provide financial expertise and support the board in areas such as strategic planning, budgeting, and financial reporting.
Support during regulatory changes
Regulatory changes can significantly impact a business's financial operations and compliance. A fractional CFO can help enterprises to successfully navigate these changes and ensure compliance with the relevant regulations.
55% of businesses cite growth as focus
Our Business Trends Report highlights business priorities in the present market. 55% of the businesses surveyed reported that expansion would be their priority during the next 12 months. This focus on expansion shows the significance organisations put on extending their operations, boosting their income, and expanding their client base.
By discovering potential revenue streams, controlling expenses, and predicting future financial performance, fractional CFOs may assist businesses with developing and implementing growth-supporting financial strategies. They may also assist in locating and securing finance for expansion plans, such as venture capital or debt financing.
Likewise, they can aid companies with navigating the financial complications accompanying expansion, such as managing cash flow, increasing operations, and complying with laws. They may provide essential financial insight and direction, helping with risk mitigation and assisting sustainable development.
How Cloud tech empowers all CFOs and businesses
Another significant insight from our Trends Report was that 62% of businesses say technology is important with supporting the profitability of their business.
Overall, CFOs and organisations benefit from having access to their financial data anytime, anywhere, and on any device, which is now possible thanks to the changing nature of finance and accounting solutions. Cloud technology paves the way for better, quicker, and more efficient decision-making.
Cloud-based financial management software assists with automating many of the manual activities involved with finance. These operations include invoicing, spend tracking, and budgeting. This ultimately decreases the amount of work CFOs and their team must do (and lessens the likelihood of mistakes).
Likewise, the advent of Cloud technology also enhances the level of collaboration and communication across the many departments and teams that make up an organisation. For instance, it provides sales teams with access to real time financial data and insights, which enables them to make choices on pricing and product development that are more well-informed.
Overall, there are several ways in which fractional CFOs might leverage the advent of Cloud-based systems:
Access to real time data
Cloud-based financial management solutions enable fractional Chief Financial Officers to access real time financial data from any place, allowing them to make educated choices and provide timely recommendations.
The technology makes it possible for the fractional CFO and other stakeholders (like investors and board members) to easily collaborate and share financial information, improving the quality of working relationships.
It also automates various financial activities, including invoicing and expenditure monitoring, which may save time and boost efficiency.
Cloud-based solutions may be scaled up or down depending on what is required, giving the fractional CFO the flexibility to manage rising workloads.
Traditional on-premise systems may be more costly because they need expensive hardware and on-site IT support, while Cloud-based systems do not have these requirements.
Benefits of Cloud tech for CFOs
As businesses continue to grow and evolve, so must their financial strategies (especially in the case of large enterprises). And while a full-time CFO may not always be feasible, that doesn't mean you have to sacrifice expert financial guidance. Enter the fractional CFO, a powerful solution for businesses navigating the ever-changing financial landscape.
Our Cloud-based accounting software, Advanced Financials, is designed to empower all CFOs, allowing them to lead the finance department seamlessly (even if they’ve only just joined the business). Collaboration, continuous accounting, and automated processes all become possible, enabling them to provide valuable insights and recommendations without delay.