When Using a Fractional CFO or Outsourced Controller Makes Sense – and When it Doesn’t
By now, you’ve likely heard about the fractional CFO model – you’re reading this post, after all. And you may be wondering if the fractional model is right for your organization. (The fractional model also includes other accounting roles, including VP of Accounting, Controller, and Accounting Manager – but that’s a topic for another post.)
A fractional CFO is a high-level financial professional who provides part-time or project-based services to businesses and non-profits. They typically have extensive experience in areas such as strategic planning and financial strategy, forecasting, risk assessment, growth acceleration, and budgeting. They can help your organization build a strong financial foundation so you can focus on growth.
However, there are also situations where an outsourced CFO may not be a good fit. In this post, we’ll cover when using a fractional CFO makes sense – and when it doesn’t.
When using a fractional CFO makes sense
- Cost-effectiveness. Fractional CFOs can be more cost-effective than hiring a full-time CFO, especially for fast-growing companies. That’s because you only pay for the services you need, and you don’t have to provide benefits or other costs associated with a full-time resource. There’s a great example of cost savings in this post on the fractional model.
- Flexibility. Fractional CFOs can provide you with the flexibility you need to grow your organization – you can scale your services up or down as needed.
- Expertise. Fractional CFOs typically have extensive experience in financial management from across a range of industries and can provide you with the expertise you need to make sound financial decisions that support your organization’s growth.
- Ready for growth. Fractional CFOs and outsourced controllers often have access to a network of resources that can further support growth – including better financial data, industry research, and access to capital.
When using a fractional CFO may not be your best option
- Small or startup organization. If your organization is small or your financial needs are simple, it’s probably more cost-effective to hire a bookkeeper or accountant to handle your day-to-day financial tasks. The sweet spot is annual revenue between $3 million and $100 million, with a target of strategic growth in the next 3-5 years.
- Communication capacity. Your fractional CFO can be a deeply embedded part of your team, but a successful integration requires communication and coordination from the organization’s leadership to ensure the CFO is onboarded and up to speed with business strategy, strengths, and challenges. If your team can’t provide that level of focus, you may be better off with an in-house resource.
- Permanent need. If your CFO requirement is full-time or you’re looking for a much longer-term commitment, you may be better off hiring a permanent CFO for your organization rather than going the fractional route. While the fractional model certainly works for long commitments, it’s not an ideal replacement for a permanent full-time CFO.
Ultimately, the decision of whether to use a fractional CFO depends on your specific needs and circumstances. If you aren’t sure whether a fractional CFO or outsourced controller is right for you, our top team of fractional accounting pros is here to help. Maybe you’d like a little more insight into the fractional model, or want to learn more about the big picture of strategic financial outsourcing. Whatever it is, we’re here to help. Contact us for a conversation.