Exploring the Benefits of a Fractional CFO
Updated: Sep 12, 2022
Financial management is a crucial business task. Whether your social impact business has a 7-figure revenue or you're looking to raise capital at the Series A and B level, a chief financial officer (CFO) plays a vital role in your growth and success.
Depending on your vision and goals, you might not need the support of a full-time CFO. If that's the case, then a fractional CFO would be your next best option to reap the benefits of a financial executive without wasting time and resources.
Read on to learn why you should hire a fractional CFO, what they do, and when and how to hire for this critical role.
Benefits of Hiring a Fractional CFO
Here are the primary benefits of hiring a fractional CFO.
Proactive planning for a smoother cash flow
It’s much easier to lose control of your cash flow than to keep it under control. Cash is the lifeblood of any business — and when a business’ cash flow goes awry, it could lead to financial ruin. Thus, your company needs an accurate cash flow forecast for the long and short term.
A fractional CFO could iron out the wrinkles in your finances and put things in place to guard your business against any incoming storms.
Analyze financial statements
A fractional CFO can help identify financial elements that seem off about financial results. By doing the analysis with a fractional CFO, you develop an eye for spotting financial wrinkles in your business. It also trains your business instincts and math skills.
Better budgeting and financial forecasts
You can't improve what you don't measure. If you do not set budgets and key performance indicators for your business, you're essentially flying blind.
If you have set your budgets and key performance indicators but don't monitor them monthly, you are still flying blind.
A fractional CFO has the financial expertise to dive deep into your business financials and isolate pain points. Only a fractional CFO would be able to suggest course corrections before you waste valuable resources and dampen your impact.
You will get the most value from a fractional CFO when you work closely with them. That's why you want a fractional CFO as passionate about your business as you are, not only a person who analyzes the state of your company's finances.
Look at your key metrics together, test and improve them or decide on a new one. Ask the what-if questions - what will happen if the business scales by X-fold or declines by X-fold? Review the financial and operating results together and compare them against the expectations. Why are there big swings in operating profits or losses, accounts receivables, or accounts payable? How do they impact future cash flow? Can we explain these changes to the directors, investors, or other team members?
Save time and resources
One benefit to hiring a fractional CFO is you're able to save time and resources.
For example, if you are in the weeds of financial reporting, either fixing what's there or creating reports from a blank slate, then you waste time. You could have spent that time focusing on marketing to a broader audience and attracting new clients. Searching for the answers to your investors', lenders', or board members' questions about customer profitability, margins, costs, and average value is also a waste of your effort. A CFO could have that data readily available, saving the most valuable resource you have: time.
If you have a fractional CFO managing your financial affairs, you can concentrate on tasks that add value to your business.
Reduce your overall business risks
Building a business will always be slightly unpredictable; the risk of market downturns leads to reduced profits. Avoiding financial adversities is challenging; these situations will severely impact your company's financial health.
The key is to figure out what you can predict and plan for the worst-case scenario. A fractional CFO can help you monitor progress, catch red flags in your finances and activities, and identify potential risks. They'll also take it a step further by implementing strategies to manage your risk in a holistic, proactive way.
Unique financial expertise
No matter how well versed you are in finance, it's always beneficial to have expert advice and additional insight.
A fractional CFO can assist you with finance and accounting, from special reports, mergers and acquisitions, discussions with lenders and investors, due diligence requirements, and so much more. Their expertise gives you critical information about how to increase profit, streamline processes, and keep your business financially secure and healthy, all while affecting positive change in the world.
Signs You Should Find a Fractional CFO
The right fractional CFO can do wonders for your social impact business. If one of the following statements applies to you, then it’s a sign you should invest in a fractional CFO:
You want your social impact business to be financially secure to keep effect change in the world.
You want to scale your mission-driven company to expand your reach.
You want to maximize your impact on the world.
You want to focus on doing what you love while staying on top of your finances.
You want your entire social impact business, from founders to employees, to understand what's happening in the company financially.
You want your mission-driven company to create ambitious but realistic visions.
You want to create business strategies and models to help realize your vision and purpose.
You want a proactive instead of reactive approach to your social impact company’s needs and problems.
By partnering with the right fractional CFO, you can grow your business successfully by tackling specific financial challenges and optimizing money and other resources. As a result, you can achieve business goals, gain a competitive edge, and become a force for good — and all that leads to business success.
If you know this is time to invest in a fractional CFO, connect with us at www.theprofitreimagined.com and get in touch with our fractional CFO.
We at Profit Reimagined Inc. pride ourselves on our curiosity, expertise, and empathy. We take the time to understand how your social impact businesses work and why you do what you do. Then, we use our expertise to amplify your social impact, create a business you love, and maximize your profitability.