What Services Does a Fractional Chief Financial Officer (FCFO) Provide?

Businesses go through different stages. When starting your business, you had a great idea for a new product or service but may have overlooked the basics of bookkeeping and finance, only looking at actual numbers when you needed your taxes done. But what direction is your company going in? Do you intend to evolve and grow? Finding an expert to establish proper bookkeeping and accounting is an opportunity to define your business goals. It should be part of your business plan. But which expert is right for you?

The Difference Between Bookkeeper, Tax Advisor, and Fractional CFO

What is the difference between these experts? The one you use depends on your budget and type of financial needs. You might get by with a bookkeeper for a while. They may not have any financial certifications, but they do have the knowledge to record business transactions, pay bills, track sales, and produce necessary financial reports.

Your tax accountant has extensive training and expertise as a CPA or Enrolled Agent to handle tax preparation, represent you during an IRS audit, and determine appropriate legal business entities. They come in handy quarterly or annually.

If you have a greater vision for your company and want to grow, you need to develop a plan to know what that looks like. The Fractional CFO usually has extensive corporate finance experience and is often a CPA, which requires a Bachelor’s degree, is state-licensed, and goes through 40+ hours of training to maintain their certification each year. They have accounting skills and apply that knowledge to big-picture thinking for the future of your business. They understand business financial management,  Generally Accepted Accounting Principles (GAAP) adopted by the US Securities and Exchange Commission, and Federal and State tax regulations.  They also have the skills to identify potential problems and find ways to solve them. Fractional CFO services can include:

  • Reviewing and helping you understand your financial statements
  • Managing an annual budget and developing a yearly strategy
  • Creating custom reports to identify and monitor key performance metrics
  • Analyzing reports to interpret results and identifying areas of concern with cash flow
  • Providing business insights and strategies for long-term objectives, including retirement and eventual sale of the business

If you have a bookkeeper, a Fractional or Virtual CFO (depending on whether they work in-person or remotely) interprets the data and results of their reports, so you know where, when, and how to focus your business efforts. They act as a sounding board and become a trusted team member who gets to know your company initiatives and holds you accountable to reach clearly-defined goals. You’ll uncover ways to cut waste, use cash efficiently, and find opportunities to grow and expand. A streamlined business puts you in a better position to compete with other organizations in your niche.

Every business decision you make has financial implications that affect areas like operations, marketing, sales, human resources, healthcare, and employee benefits. If you don’t have the budget for an in-house CFO and want to go beyond maintaining your existing business with a bookkeeper, you can outsource Fractional CFO services on a part-time or project basis to suit your budget. With their help, you’ll identify opportunities to strengthen or grow your company. That includes consulting for:

  • strategic planning
  • budgeting
  • financial forecasting
  • tracking cash flow
  • analyzing strengths and weaknesses
  • suggesting corrective action

When you don’t have the benefit of a full C-suite yet, a Fractional CFO sets up healthy financial processes with the right structure for your back office from the beginning. It may seem costly at first, but fixing it later costs much more. Many small businesses fail due to poor processes and an inability to measure and track financial activity.

When to Choose a CFO

If you struggle with your business finances, need advice on which metrics to track, or assistance interpreting the data, look to a Fractional CFO. When choosing your FCFO, think about which projects you want them to focus on, how you will interact (in-person or remotely), how often they’ll need to meet with your team, and if you want someone with subject matter expertise in your industry.

Fractional or Virtual CFOs advise all types of companies, from startups to large enterprises, but there are times when you’ll find them even more beneficial:

  • Startups use a project-based FCFO to get set up correctly.
  • Companies use them when raising capital to organize processes to appeal to investors.
  • FCFO services determine why a successful business has revenue but no cash.
  • They help business owners who don’t like math to focus on what they do best.
  • Businesses replacing or choosing an accounting platform look to a Fractional Chief Financial Officer to audit different systems and find the right fit.

Questions to Ask Yourself

Do you understand what it will take to make your company profitable? What is your gross margin, and how does it compare to others in the industry? Do you have a dynamic plan that allows you to pivot when business conditions change? Are you chasing the bright, flashy things or those that create profitable growth?

To grow your business, you need answers to questions that give you a clear financial picture. Finance and accounting functions can be broken down into six categories:

  • General accounting
  • Treasury
  • Financial reporting
  • Financial planning and analysis
  • Tax accounting
  • Internal audit

If you are only focusing on vendor services, paying bills, and getting your taxes done, you are missing other critical areas of business finance. Managing your resources effectively allows your business to thrive.

At ClariFI Business Solutions, we offer FCFO services to guide you on a path to profits and growth. We believe there is a story hidden in the numbers that can help drive better decisions to grow your business and profit. We provide a free business health assessment and would love to help you understand that story. Your small business deserves to have a financial expert to nurture financially healthy habits and provide much needed insights. To learn more, please contact me online or email me at jyaeger@clarifibusiness.com.

ClariFI Business Solutions, LLC is an accounting and financial consultancy providing small to mid-sized businesses with holistic financial expertise and services that promote long-term success.