Hiring a fractional CFO is one of the smartest moves a business can make, especially if it's in a growth stage or needs professional financial guidance but can't afford to hire a full-time CFO. But the big question that always comes up for business owners is, "How long do we need to retain these services?" The time needed for fractional CFO services can differ depending on any number of things including the specific needs of your business, the financial challenges you're facing, and the desired outcomes.
In the following, we will look in-depth at what influences the time needed for fractional CFO services and how to determine the optimal duration for your company's engagement with a fractional CFO. We will also discuss the differences between outsourcing CFO services and in-house CFOs, the benefits of outsourced accounting, and how industries like construction and real estate accounting can benefit from the guidance of a fractional CFO.
Before figuring out how long a fractional CFO should work for your business, it's good to know why many companies go with these services in the first place. A fractional CFO provides strategic financial leadership without the need for a full-time executive.
Many businesses, especially smaller ones or those in industries like construction and real estate accounting, cannot afford the salary of a full-time CFO. But they still need professional financial guidance to improve cash flow management, budgeting, and financial forecasting.
Overall, a fractional CFO can bring immediate insights and strategies to simplify operations, reduce costs, and boost profitability. From startups to growing enterprises, the expertise of a fractional CFO can bridge the gap between daily accounting tasks and higher-level financial strategy.
But how long should you retain these services? That answer can be influenced by a number of factors.
One of the biggest things determining the time needed for fractional CFO services is the immediate financial health and needs of your business. Are you looking for assistance with short-term goals like cleaning up your financial books, improving cash flow management, or setting up financial controls?
If so, a fractional CFO may only need to work with your business for a few months to set up processes and offer financial guidance. Once these systems are in place, you may find that your in-house accounting team can handle the day-to-day financial management.
But businesses in more complex industries, like construction and real estate accounting, might have ongoing financial challenges that require longer engagements with a fractional CFO. These businesses deal with fluctuating revenues, long project timelines, and unique tax challenges - all of which could require continuous financial oversight.
In such cases, a fractional CFO might need to work with your business for an extended period, potentially on an ongoing basis.
Another important thought when determining the time needed for fractional CFO services is whether your business requires a project-based or ongoing engagement. Some companies might hire a fractional CFO for a specific project, like raising capital, restructuring debt, or preparing for an acquisition.
In these cases, the fractional CFO may only be needed until the project is complete. This could be a few months or up to a year, depending on the complexity of the project.
For businesses that need ongoing financial strategy, a fractional CFO could be required for several years. Ongoing engagements sometimes involve regular oversight of the company’s financial health, long-term financial planning, and continuous collaboration with the executive team.
Many companies find that retaining a fractional CFO on a part-time basis indefinitely is an excellent way to have expert financial guidance without the full-time salary.
The growth stage of your business plays a big part in figuring out how long you need fractional CFO services. For example, a startup that has just secured its initial funding may need a fractional CFO to help set up financial systems, create financial forecasts, and guide the company through the early stages of growth.
But as the company matures, it may transition to needing less financial oversight and may lessen its reliance on a fractional CFO.
On the other hand, a fast-growing company that is scaling quickly might need to retain a fractional CFO for an extended period to make sure financial strategies are in keeping with rapid growth. The time needed for fractional CFO services in these cases is usually longer, because the fractional CFO helps manage the financial complexities that come with expansion - like managing cash flow, securing additional funding, and optimizing profitability.
Another thing that influences the time needed for fractional CFO services is the seasonal or industry-specific demands of your business. For example, industries like construction and real estate accounting frequently face cyclical cash flow patterns.
In these industries, having a fractional CFO for a specific season or project cycle may be enough. The fractional CFO can provide oversight during busy periods and scale back during slower times.
But industries with consistent year-round financial demands might require ongoing fractional CFO services to manage long-term financial planning, budgeting, and performance analysis. The flexibility of outsourcing CFO services allows companies to adjust the level of financial support based on the seasonality and specific needs of the business.
As your company grows, there could come a point where a fractional CFO is no longer enough to meet your business’s financial needs. If your business reaches a size where ongoing, full-time financial leadership is required, you may need to transition from outsourcing CFO services to hiring a full-time CFO.
This usually happens when companies reach a certain revenue threshold or when they have complex, ongoing financial needs that demand daily oversight.
Here, the fractional CFO can assist with the transition by helping to onboard a full-time CFO and assist with a smooth handoff of responsibilities. This phase of engagement is critical, because it helps guarantee continuity and stability in your company’s financial operations.
Many businesses combine fractional CFO services with outsourced accounting to meet both strategic and operational financial needs. While the fractional CFO focuses on high-level financial strategy, outsourced accounting services manage the daily accounting tasks like bookkeeping, payroll, tax preparation, and invoicing.
This combination can be particularly effective for businesses in industries like construction and real estate accounting, where both day-to-day financial management and long-term financial strategy are important.
The time needed for fractional CFO services in this case could be influenced by the efficiency and performance of your outsourced accounting team. If your accounting tasks are running smoothly, you might only need a fractional CFO for strategic oversight and occasional financial reviews.
But if your business faces ongoing financial challenges, you may need to retain both services for the long term for a smooth financial operation.
One of the biggest benefits of hiring a fractional CFO is the flexibility it offers. Different from a full-time CFO, a fractional CFO can work on a part-time or as-needed basis, allowing you to scale their services based on your business’s financial situation.
For example, a company might only need a fractional CFO for a few hours each week during the slow season but may require more extensive support during periods of growth or financial restructuring.
The time needed for fractional CFO services can be adjusted based on these changing needs, giving businesses a cost-effective way to access high-level financial expertise. This flexibility is especially valuable for companies with fluctuating revenues or seasonal demands.
When determining how long you should retain fractional CFO services, have clear metrics in place to measure success. Establishing key performance indicators (KPIs) at the beginning of the engagement can help both the business owner and the fractional CFO assess the effectiveness of the services.
Common KPIs include improvements in cash flow, increased profitability, more accurate financial forecasting, or successful completion of financial projects.
If your fractional CFO engagement is delivering measurable results, it could make sense to extend the relationship for the long term. But if the desired outcomes have been achieved within a specific timeframe, you might be able to scale back or end the engagement.
Another thing to consider when determining the time needed for fractional CFO services is whether your business would benefit more from a fractional CFO or an interim CFO. While both provide financial leadership, the difference lies in the scope and duration of the engagement.
An interim CFO is usually hired during a time of transition, like when a full-time CFO leaves the company, and the job needs to be filled temporarily. But a fractional CFO provides ongoing financial guidance on a part-time basis.
Depending on your business’s needs, you may go with one over the other. But knowing the distinction can help you decide how long to retain their services.
One of the often-overlooked benefits of hiring a fractional CFO is the part they play in strategic planning and risk management. Although many businesses initially bring on a fractional CFO to deal with immediate financial challenges, they soon discover that this job extends way past just number-crunching.
A fractional CFO can help you identify potential risks to your business, whether they are related to cash flow, market fluctuations, or operational inefficiencies. By recognizing these risks early, a fractional CFO can put measures in place to reduce them - which can help protect your company’s bottom line.
Also, strategic planning is a core function that goes hand-in-hand with financial forecasting. As your business grows, you may be entering new markets, launching new products, or making capital investments.
A fractional CFO plays a major role in making sure these strategic initiatives are financially viable. They see whether the necessary resources are in place, whether cash flow projections line up with your business goals, and what financial contingencies might be needed if things don't go according to plan.
Many companies need this type of guidance to work through industry-specific challenges. Long project timelines, fluctuating material costs, and complex regulatory environments can all affect financial health. A fractional CFO makes sure businesses are prepared for these variables, which can make or break the success of large-scale projects.
Another advantage of having a fractional CFO is their ability to propel innovation within your financial operations. As outside consultants, fractional CFOs bring fresh perspectives and innovative ideas that internal staff may overlook.
By using industry best practices and advanced financial technologies, they can help your business simplify processes, reduce costs, and improve financial efficiency.
For example, in industries with complex accounting needs, a fractional CFO can use cutting-edge financial software or reporting tools that increase transparency and improve decision-making. This modernization can lead to more accurate financial data, faster reporting, and better strategic decisions.
What’s more, businesses that use outsourced accounting services can benefit from the technical expertise that a fractional CFO brings to the table. By optimizing existing outsourced accounting functions, a fractional CFO sees to it that the company's financial data is not only accurate but actionable.
This innovative approach can reveal cost-saving opportunities and revenue streams that may not have been identified otherwise.
Not every business needs the same type of financial leadership, and that's why the job of a fractional CFO should be customized to your specific business requirements. Whether your business needs short-term support for a specific initiative or ongoing financial leadership, customizing the job means that you’ll get the maximum value from your fractional CFO services.
Some companies might only need a fractional CFO to manage certain high-level tasks like financial reporting or regulatory compliance. Others may require more involvement in day-to-day financial operations.
When it comes to outsourcing CFO services, flexibility is imperative. You can adjust the scope of your fractional CFO's role based on changing business needs, like a sudden alteration in market conditions, an acquisition, or new financial challenges. This customization helps see to it that you are not overpaying for services you don’t need, but still benefiting from top-tier financial expertise.
Industries like construction and real estate accounting especially benefit from this flexibility, because the financial needs of these businesses can change dramatically depending on project pipelines and market demand. A fractional CFO can step in to offer the precise level of financial oversight required, adjusting their time and duties as your business scales or shifts.
Finally, one part of a fractional CFO's job that is critical for businesses in search of external funding or managing investor relationships is their ability to communicate with investors and stakeholders. A fractional CFO makes sure your financial reporting is transparent, accurate, and aligns with investor expectations.
By presenting detailed financial forecasts, capital requirements, and risk assessments, a fractional CFO can boost investor confidence and help your business secure the necessary capital for growth.
What’s more, as your business grows and takes on new rounds of funding, the time needed for fractional CFO services may increase to accommodate the ongoing demands of investor relations. Here, a fractional CFO will manage your company's financial health but also provide the financial narrative that investors are looking for.
Their ability to articulate financial strategy in a way that hits home with stakeholders is a distinct asset in securing future investments.
At Plumb, we know the complexities businesses face when determining the right financial leadership for their needs. With decades of experience in outsourced accounting, construction and real estate accounting, and outsourcing CFO services, we are well-equipped to guide your company through financial challenges and opportunities.
Our focus on quality, industry expertise, and customized solutions means that our clients receive the highest level of financial guidance. Whether you need a fractional CFO for a specific project or ongoing strategic support, our team can adjust the time needed for fractional CFO services to your unique business needs.
Call us today at 800-123-4567 or use our online form to learn how we can help you achieve your financial goals.