What is a Fractional CFO and is it the Career

What is a Fractional CFO and should Finance Professionals Consider it as a Career Move?

Not all businesses have the budget or workload for a full-time CFO role. Startups and SMEs require assistance with strategic planning and financial guidance without the cost of a full-time CFO. That is where a fractional CFO comes into play. They provide the necessary expertise and skills for however long the business needs or wants.

Fractional CFO vs Full-time CFO

A traditional CFO is a permanent leader of a business that absorbs all responsibilities for its financial strategies and growth. The role of a CFO can be a rewarding career path but might not offer the variation and self-development that financial professionals desire. It is also a career path that takes a long time to achieve.

The business world is experiencing the rise of the fractional CFO. These are finance leaders who lend their expertise to multiple companies on a contract, part-time, or project basis. These individuals are usually experienced CFOs with a background working across different industries and disciplines. Fractional CFOs often work with multiple clients at once and help businesses make informed decisions on their financial future.

Why is There Demand for Fractional CFOs?

The fractional CFO model is experiencing significant growth due to several key factors:

Cost-Effectiveness: Hiring an experienced CFO is a significant financial commitment for a business, especially for start-ups. A fractional chief finance officer can help a business make the right financial decisions and support all financial needs at a lower cost. Studies by Harvard Business Review suggest that fractional CFO arrangements can be up to 70% more cost-effective than hiring a full-time CFO.

Flexibility: Fractional CFO work is completely flexible and a business can engage their expertise for as little as a few hours a week. This provides a tailored approach to leadership in the world of finance.

Quick Access to Expertise: A fractional CFO can bring a breadth of knowledge across financial disciplines that a start-up would not have access to. The best fractional CFOs can offer guidance on mergers and acquisitions, financial planning, financial modelling, fundraising, interim management, and financial reporting depending on their career journey so far.

Core Business Focus: Fractional leaders can oversee the leadership of a business while the existing finance function and executive team invest their time into increasing market share and executing strategies.

Benefits for Senior Finance and Accounting Professionals

The benefits of fractional CFO opportunities for finance professionals are vast:

The Move to Strategic Partner: A fractional CFO role is a great way to expand your knowledge quicker than the traditional CFO route. You will be guiding clients through critical business decisions and steering them toward success.

Expand Your Skillset: Exposure to various industries exposes you to a diverse array of challenges and improves your problem-solving ability.

Develop Your Business Mindset: Your focus will be on developing a business strategy from financial data, gaining insight into multiple areas of the business, and becoming a trusted partner to executive teams.

Building Your Network: A career as a fractional CFO allows you to build a strong network of connections in the finance and accounting industries. You will develop new mentoring relationships and opportunities for future alliances.

Better Work-Life Balance: Many fractional CFOs enjoy a flexible working pattern and choose their clients and workload. It offers you a greater work-life balance and a lifestyle that has the right combination of relaxation and work for you.

Fractional CFO offering financial guidance

How to Become a Fractional CFO

Gain the Right Skills: Any CFO must have a strong grounding in finance and accounting basics. Ensure you have in-depth knowledge of financial analysis, modelling, and strategic planning. Most executive-level roles will require a professional qualification such as ACA, ACCA, or CIMA.

Find Your Expertise: Choose an industry or niche to become a specialist in and fully develop your expertise in that area.

Network With Purpose: Connect with executive leaders, potential clients, and those already engaged in fractional work. Consider attending and networking at industry-specific events.

Develop Your Brand: Use LinkedIn to develop your online presence and showcase your expertise.

Start Small: Kickstart your fractional career by taking on interim work and shorter project-based assignments. This helps to build your client base.

When to Hire a Fractional CFO

Engaging fractional CFOs brings a wealth of experience to a business, but it is not the right solution for every company. When to seek the services of a fractional CFO:

If You are a Startup: During the early days of starting a business, there may not be the resources available to hire an executive leader. A fractional CFO can provide their expertise for securing funding and ensuring business growth.

Financial Transformation: A fractional CFO can implement strategic change when a business experiences financial restructuring.

Mergers and Acquisitions: A business may wish to grow by acquiring other businesses. Fractional CFOs can guide that business through deal structuring, valuation analysis, and post-merger integration.

Temporary Absence: Much like the traditional outsourced CFO or Interim Manager, fractional CFOs will fill leadership gaps during periods of absence or transition periods.

To Improve Efficiency: A fractional CFO can help streamline financial operations, automate processes, and implement best practices to help improve efficiency.

The Future of Fractional CFOs

The role of fractional CFO is becoming more prominent across new businesses, and businesses that do not require a full-time CFO. As the economic climate increases competition and the demand for top talent, the role of a Fractional CFO will take on greater prominence in organisations across the UK. This is what the future of fractional work could look like:

Specialisation: Fractional CFOs will specialise in areas like venture capital, technology startups, project implementation, and crisis management. This means businesses will receive tailored guidance based on their needs.

Technology Integration: Technological developments in the workplace will coincide with fractional work. Cloud-based accounting platforms, data analytics tools, and collaboration software will streamline communication, improve efficiency, and allow for real-time financial insights.

Subscription-Based Guidance: Fractional CFO services will become more widely available on a subscription basis offering businesses a clear cost structure and improved access to financial expertise.

AI-Powered Support: Artificial intelligence (AI) now plays a greater role in the finance and accounting sector and is set to support Fractional CFOs with data analysis and reporting.

The fractional CFO model offers a unique solution for startups and organisations that do not have the budget for a full-time CFO but need strategic financial leadership.

It offers finance professionals improved work-life balance and the opportunity to develop their careers quicker than the usual CFO route. Whilst lending their expertise to an SME and assisting them in achieving their financial goals, finance professionals working on a fractional basis enjoy fully flexible working and higher earning potential.

We are already seeing an increase in the need for Interim Managers. As the business landscape continues to evolve more finance and accounting professionals are expected to adopt the fractional CFO career model, guiding multiple businesses and finance teams at one time.

At Chilworth Partnership, Chris Judd specialises in Interim Management and Fractional appointments. If you are a finance professional considering a fractional career, or you are a business that could benefit from the expertise of a fractional professional, email chris.judd@chilworthpartnership.co.uk