Top 6 Reasons Your Business Is Ready for a Fractional CFO

Apparently, there has been a significant uptick in the number of startups hiring CFOs. The demand for fractional CFO services specifically has increased dramatically over the last few years.

This trend is primarily driven by increase in VC funding for US startups (U.S.- based startups raised over $100 billion in venture funding in 2023). Investors are now expecting a higher level of financial management from startups.

But the question remains – Is your business at a stage where a CFO is needed?

That's exactly what we’re here to discuss. But before we jump into the main topic, let’s talk a look at how fractional CFOs differ from full-time CFOs and why the scale is tipping in favour of the former where startups are concerned.

Fractional CFO vs Full-Time CFO

The job description of both fractional and full-time CFOs is to oversee the finances of a business and create a financial plan for its success. But a fractional CFO works on a part-time basis with multiple companies, and a full-time CFO is a permanent employee of one company.

Learn more about Fractional CFOs here: What Is a Fractional CFO? How to Hire One?

Here are the major differences between the two:

Fractional CFO	Full-Time CFO
Hired on a flexible basis – monthly/quarterly/annually.	Hired on a full-time basis.
Helps with strategic financial planning, budgeting, cash forecasting, and fundraising prep.	Deeply involved in the day-to-day financial operations of a company.
Can be hired and onboarded quickly.	Hiring and onboarding process is long and time-taking.
Best for startups and small businesses.	Best for mid to enterprise level companies.
Cost-effective	Higher costs including benefits and bonuses.

It’s clear that small businesses and startups are opting for fractional or part-time CFOs due to their cost-effectiveness. While it’s becoming just as important for startups to have a strong financial organization as mid and large companies, the cost of a full-time CFO is usually out of their budgets.

More importantly, the financial operations of these companies often don’t require daily involvement that a full-time CFO provides. Weekly or monthly engagement with a fractional CFO, depending on a business’ needs, brings in the financial clarity and guidance that startups and small businesses require.

Reasons Your Business is Ready to Hire a Fractional CFO

Now that we’ve covered the basics, let’s understand in detail the signs that indicate your business needs the expertise of a fractional CFO.

• Your business is scaling fast: If your business is growing fast, chances are you’re struggling with managing your finances efficiently. As a business owner or CEO, you have multiple responsibilities and adding on the burden of financial planning can be overwhelming. Moreover, as a business grows, its financial complexity grows as well. You may have been able to manage finances at an earlier stage, but rapid growth cannot sustain on basic bookkeeping.

  Also read: Beyond Basic Bookkeeping: How CFO-Level Insights from Bookkeepers Improve Decision-Making

  At such a stage, hiring a fractional CFO will certainly ease your burden and allow for better financial clarity. The CFO will help you build sustainable financial systems and strategies to boost your growth even further.

  Hiring a fractional CFO will further give you more time to focus on tasks that require your attention. You can peacefully expand your team, add new revenue streams, and explore new markets without having to worry about financial operations.

• You want better visibility in your finances: You may be finding yourself in situations where your decision-making is running on guesswork. This may work till a certain point in the journey of your business, but it’s not a long-term solution.

  A fractional CFO can help you with strategic financial planning, both long-term and short-term, so your decisions are data driven. Your CFO will create weekly/monthly financial reports, financial models, and real-time financial dashboards to help you understand your financial situation better. They can further help you set realistic financial goals and KPIs you always have clarity about how your business is going.

• You’re preparing for fundraising: Fundraising preparation is quickly becoming one of the key reasons why businesses are employing part-time CFOs. The larger picture is that investors now expect startups to have a clear-cut idea of their financial growth models. This means that any fundraising prep that is less than perfect can actually cost your business.

  Therefore, if you are planning for your next funding round, it is important that you take the help of an expert financial advisor. A CFO can help you build better investor decks and create accurate financial projections. They will further ensure that your finances are compliant with all the accounting standards and audit ready. This will help with presenting a clear and clean picture of your finances in front of investors.

• You’re struggling with efficiently managing cash flow: After a certain point, a lot of businesses struggle with cash flow management. If you’re finding yourself in a position where accounts receivables are getting delayed and inconsistent vendor payments are landing you in tough spots, it might be time to consider hiring a fractional CFO.

  Your CFO will take accounts receivables and payables management off your hands. They will put efficient workflows in place to ensure cash flow is maintained consistently. All in all, with the help of a fractional CFO, you will have optimized cash cycles and enhanced working capital efficiency.

• You’re not able to hire a full-time CFO: Another major challenge that startup owners face is that they can’t hire a full-time CFO. You might have realized the need for enhanced financial guidance but may not be able to bear the cost of hiring a full-time CFO.

  A fractional CFO is the perfect solution for this situation. Your business will gain all the benefits of having a CFO without having to bear high costs with a part-time CFO. The option gives you more flexibility and control over how often you want to engage with the CFO.

• You want to move from bookkeeping to strategic finance: If you’ve realized that basic bookkeeping focused on compliance and taxes is no longer enough to scale your business, a fractional CFO is certainly the next step.

  For long-term, sustainable growth, your business needs expert financial leadership. Bookkeeping solutions, while necessary, can only help you maintain clean books. Strategic financial management however will give your business the edge it needs in the competitive landscape. A fractional CFO can help you take the leap from bookkeeping to advanced financial management so you can prioritise crucial growth opportunities.

How Fincent Can Help

Fincent’s fractional CFO services are specifically built for small businesses and startups who want financial strategy to be a growth factor. We can help you make better financial decisions so you can scale your business steadily.

Here’s what you get with Fincent’s fractional CFO services:

• Dedicated CFO support: We will provide you with an expert CFO contact who will help you with improving financial management.

• Expert and affordable financial leadership: Fincent’s CFOs are carefully selected to provide the right financial guidance for your business without burning a hole in your pocket.

• Plans tailored for your needs: We offer diverse pricing options so you can get the exact financial management support you are looking for.

If you’re interested in knowing more about Fincent’s fractional CFO services, you can book a demo with us.

Conclusion

In today’s highly competitive business world, you need to get outstanding financial advisory to stay two steps ahead of your competitors. A fractional CFO can give you that exact edge and help you make smarter financial decisions.

Moreover, hiring a professional to manage the finance will let you focus all your energy on doing what matters – finding new growth opportunities.