How Does the Fractional CFO/Controller Model Work?
Published on by Jill Prendergast in Client Accounting & Advisory
There’s no end to the talent crunch in sight, and more and more organizations are exploring innovative ways to meet business needs. One gaining traction fast is the fractional CFO/fractional Controller model. Why? First, the fractional model allows businesses and non-profits to acquire the same advice and direction they’d receive from an internal CFO at a lower cost – and without the overhead of taking on another full-time resource.
Another great benefit of the fractional model is the depth and breadth of knowledge and insight the CFO has gained from working with other clients and industries. Turnover is also no longer a concern because the outsourcing provider carries the responsibility for providing coverage to meet the client’s needs.
For the fastest-growing organizations, employing the fractional CFO or fractional Controller model means senior leadership can spend less time on finance and reporting matters, and more time focused on strategy, growth, and scaling operations.
How does the fractional CFO model work?
The fractional model provides fractional (part-time), or outsourced, staffing resources within the accounting and finance sector, deploying dedicated professionals whose expertise mirrors that of full-time industry resources with titles including Chief Financial Officer, Vice President of Accounting, Controller, and Accounting Manager.
The fractional resource provider works with the organization’s leadership to assess needs and identify how much time must be allotted to manage the company’s finance and accounting needs and engage in strategic planning. From there, the fractional resource provider will tailor a resource plan to meet the specific needs and goals and the associated costs to be incurred.
Fractional resources span a wide range of industries and organizations – for example, the Barnes Dennig fractional model team has expertise in Manufacturing, Construction, Real Estate, Technology, Transportation and Logistics, Consumer Goods, and Not-for-Profit.
Who should consider the fractional model?
Companies and non-profits with annual revenue between $3 million and $100 million, with a target of strategic growth in the next 3-5 years are an ideal fit. Many fast-growing organizations want a full-time in-house resource, but find the annual cost is outside their budget constraints – and a fractional resource can provide a great return on investment for those organizations.
What are the fractional accounting and finance roles?
Chief Financial Officer
A Chief Financial Officer role provides meaning to a company’s financial numbers, using their expertise to help leadership identify growth goals, create an actionable strategic plan, oversee ongoing finance and accounting operations, maintain and develop investor relations, negotiate debt and loan needs to drive growth and stability, and provide financial planning for mergers and acquisitions or the sale of a business.
Vice President of Accounting
The Vice President of Accounting (or Director of Accounting) role provides high-quality, efficient, effective, and accurate financial services, establishes and communicates policies and procedures necessary to ensure proper and efficient use of company resources, effect change through continuous process and quality improvement with a progressive vision toward the future, safeguard an organization’s assets, and focus on providing reliable and meaningful information to decision makers.
The Controller role takes responsibility for all aspects of accounting operations, including planning and directing of functions such as billing, accounts receivable (A/R), accounts payable (A/P), general ledger (G/L), cost accounting, revenue recognition, taxes, financial statement preparation, preparing and analyzing annual budgets, increasing reporting efficiencies, and establishing financial policies. Ultimately, they ensure the organization’s finances run smoothly.
The Accounting Manager role is to prepare and review financial documents, reports, and statements. They take responsibility for overseeing the organization’s daily Finance and Accounting functions, including budgeting, bookkeeping, accounts payable and receivable, payroll, end-of-month close, audit preparation, and other related duties as assigned. Additionally, the Accounting Manager is responsible for developing and maintaining accounting principles, practices, and procedures to ensure accurate and timely financial statements.
Run the numbers – how does this save money and provide value?
Deploying an in-house full-time Chief Financial Officer can require, at minimum, an organization to spend $250,000+ when considering base pay, bonus or sweat equity, and benefits. In many businesses and non-profits, a full-time CFO isn’t necessary because the organization doesn’t have the demand of 40 hours per week consistently. Instead, fractional CFOs can be deployed at an hourly rate or at a monthly fixed fee (in most cases).
For example, Company A is looking to engage with a fractional CFO to guide the creation of a strategic plan with leadership, implementation of accounting best practices, and ensure a scalable reporting function for future growth.
In this example, a fractional resource can be deployed for $7,500 a month to accomplish the predetermined and ongoing scope of needs, for a total annual cost of $90,000 versus $250,000 per year for a full-time resource.
Other fractional resources can drive similar savings.
How do fractional CFO/controller services align with other accounting services?
The key to a “best in class” experience is to consider the fractional resource as a member of the team rather than an hourly consultant. Embedding the fractional resource in the team and interacting with them accordingly helps them provide the best advice – and optimize the value of the fractional resource investment.
Want to know more?
If you’re interested in the fractional model or other client accounting or advisory services, explore 5 key advantages for your business or non-profit. Or, contact us. Our team of top professionals is here to help.