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Fractional CFO vs. Traditional CFO: What's the Difference?

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By Jennifer Barnes, Founder & CEO

 

As the owner or CEO of a corporation, it's up to you to make sure you hire top talent. And sometimes the most brilliant talent is found through outsourcing. Below you will find out about how outsourced Chief Financial Officers (CFOs) help to transform your business. We will also help you find the best path to landing a talented fractional CFO.  

Outsourcing, or the use of fractional services, is something you can now find an abundance of in your own backyard. Many early adopters of fractional services have achieved greater efficiencies and increased their bottom line. Also known as fractional CFOs, outsourced CFOs perform all of the same tasks as traditional full-time CFOs. However, they differ from full-time CFOs in two key ways. First, they are not full-time employees. And second, they provide services on an as-needed basis.  

In addition to these key differences, a fractional CFO is hired, paid, and trained by the firm they work for. Having a fractional or part-time CFO can save you quite a bit of money because you can scale their services up or down based on your needs. It’s unlikely if your business does less than $40 million in revenue that you need a full-time CFO, but there are reasons that businesses under $40 million in revenue decide to hire a full-time person. Either way, you don’t want your CFO doing anything below their level. Even having a CFO do month-end close is not a good use of their time. And you certainly don’t want your bookkeeper trying to do CFO work. If they were capable of being a CFO, they wouldn’t hold a bookkeeper title!

The benefits of hiring a fractional CFO

Outsourcing a CFO can benefit businesses of all sizes. However, outsourcing can be especially helpful to small and growing businesses with modest budgets and resources. From providing cost savings to stellar leadership, a fractional CFO can transform your business.

Here are the top five benefits of hiring a fractional CFO:  

1) Cost savings

It can cost up to $400,000 per year to hire a full-time CFO. In many cases, they may also want equity, bonuses and profit sharing. This is an expense that many businesses simply cannot afford. Fractional CFOs can be hired at a fraction of this rate and are often paid by the hour. And because companies pay for financial services as they need them, some businesses can save over $100,000. In short, Outsourced CFOs offer top-notch financial leadership without the six-figure price tag.

2) Improved cash flow

Guidance from a trained financial expert will help ensure that you have the cash on hand necessary to invest in new projects or inventory. Here are some of the specific ways that a fractional CFO can help improve your cash flow:

  • Introduce strategies to prompt clients to pay invoices faster
  • Work with banks and creditors to manage lines of credit
  • Ramp up collection activities to expedite receipt of payments  

3) Financial leadership when you need it most

An outsourced Chief Financial Officer has the skill and training to make strategic recommendations and difficult decisions for your business. They offer objective leadership that can help your corporation's bottom line and long-term growth. For example, they may suggest that you consolidate departments or eliminate certain costs. They can help you with your compensation plans, assist with strategic planning, analyze margins by business unit or revenue line item and play captain of your accounting department, keeping people on track and your financials delivered on time.

4) Enhanced profit margins

A healthy bottom line can become a reality with the expertise of a top-notch fractional CFO. Here are some key ways outsourced CFOs can help you improve your company's profit margins:

  • Work with your leadership team to develop a budget
  • Track your spending and analyze what’s needed and what isn’t.
  • Review financial statements with you at a high-level, allowing you to focus on what’s important.
  • Analyze data on a monthly basis to determine where profits are originating from.

5) Increased focus on financial goals

Without the help of an experienced CFO, companies can lose focus on key financial goals. Outsourced CFOs are trained to review your company's objectives and make sure that you never lose sight of your most important priorities. For instance, they can help you decide whether to expand your services or introduce a new software platform. They can also suggest when it would make sense to launch a new product line.

How to Select the Best Outsourced CFO

There are many ways a fractional CFO can benefit your business. However, not all CFO outsourcing firms are created equal. It's up to you to carefully evaluate your options and choose a trusted firm to meet your needs.

We invite you to contact us at Optima Office to find out why we have been able to attract and retain the best CFO’s on the market. Our highly skilled fractional CFOs complete rigorous testing and assessments to ensure that you receive five-star financial leadership. We look forward to matching you with a dynamic, creative CFO who'll make a major difference to your bottom line.

 

DISCLAIMER – Due to the daily changing environment and guidelines being provided by the government, this information could be outdated. Please contact our office for the latest updates and guidelines. Optima Office is not responsible for any actions taken due to the information provided. The information provided here is for instructional purposes and does not represent legal advice being given by Optima Office.

 


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