What does a fractional CFO do?
A fractional CFO is an experienced finance expert who oversees the critical strategic financial decisions that are essential to a company's success. Their responsibilities include:
- Creating and managing the company's annual budget
- Forecasting revenue, expenses and cash flow
- Identifying and tracking key performance indicators (KPIs)
- Managing revenue, expenses and the resulting liquidity
- Reviewing supplier contracts and advising on negotiations
- Assessing the impact of different business scenarios and taking timely action
- Supporting the preparation of investor reports and board presentations
- Developing and supporting fundraising strategies
"Fractional" simply means that you are working with a part-time CFO, without the financial and administrative obligations of a full-time hire.
Why do you need a fractional CFO?
If you are a start-up or SME looking to scale effectively, invest in growth or increase your chances of successful fundraising, having a CFO is essential. A CFO manages the company's finances by applying data-driven strategies: annual budgeting and forecasting, cash management, KPI evaluation and overseeing fundraising activities.
They can also take care of cost control, cash flow optimisation, profit growth, return maximisation and scenario planning. For early-stage start-ups, however, hiring a full-time CFO may not be cost-effective. In these cases, bringing in a fractional CFO (also known as an outsourced CFO) is the more practical choice.
When should you bring in a fractional CFO?
There is no right or wrong time to hire a part-time CFO. Fractional CFOs often work with clients ranging from the pre-revenue stage to those raising their Series C round. In general, the best time to bring in a fractional CFO is when you:
- Want to plan your business and manage it by the numbers. A fractional CFO analyses your historical financial data and uses their industry knowledge to forecast and model how your company will develop.
- Are looking to introduce scalable finance systems. They can recommend financial management systems and a finance toolkit to support your long-term growth, saving your company time and money.
- Are preparing to raise capital. If you are preparing for a funding round, a fractional CFO should be a priority. They can advise you on financing options, help you prepare pitch decks, provide investor-ready financial models and evaluate term sheets.
How should you build your finance team?
It is never too early to hire a part-time CFO. Fractional CFO teams work with clients at every stage, from pre-founding through to companies raising their Series C. The adaptability of a part-time CFO, whether in a lighter or a more comprehensive engagement, can significantly increase your company's likelihood of success in any economic environment.
Now is the right time to get in touch with a fractional CFO so that your company is prepared for the uncertainties of 2024. Book a personal conversation with a CFO to get answers to your questions, receive tailored advice and gain an impression of what it would be like to have a CFO on your team, running your company's finances efficiently.
