FAQ

Get Informed

What does a CFO do?

A Chief Financial officer (CFO) is a senior executive who is responsible for driving the financial health of an organization. A CFO projects outcomes and identifies areas of risks, so the business can make adjustments for the best result.

Different from a CPA who relies on historical information, a CFO makes predictive recommendations through their financial analysis.

A CFO has six broad responsibilities:

Financial planning and strategy
Manage cash and cash flow
Raise capital from banks and investors
Drive performance in conjunction with COO and Sales
Oversee Accounting and Reporting
Lead mergers and acquisitions transactions

This is much broader responsibility than that of a Controller whose primary responsibilities are producing monthly financials, overseeing daily transactions, reconciling all accounts and closing the books each month.

How is a fractional CFO different from a full-time CFO?

A full-time CFO has all the responsibilities of a CFO; however, in order to justify a full-time CFO, a company would need to have revenue of at least $75mm (this way the CFO has enough work).

A Fractional CFO does all the same things as a full-time CFO, but the scope of work can be tailored to the specific needs of a company. This could range from simply advising the CEO on financial matters to taking on 2-3 responsibilities of the full-time CFO.

A fractional CFO brings equivalent experience and expertise as a full-time CFO, but does not require the full-time salary, vacation, and benefits. Also known as an interim CFO, a fractional CFO is ideal for growing companies who need the strategic, financial guidance of a CFO, but do not require 40 hours per week.

The work might focus on specific financial challenges or may be to create a long-term approach for optimizing the overall financial performance and value of the business.

What does a Fractional CFO do?

When you contract with a fractional CFO, you’re getting all the skills and experience of a regular CFO, but on a part-time basis (usually between 10 and 20 hours per week).

Here’s what a part-time CFO can do for your company:

Legal & Risk Analysis – Even companies with a full-time CFO may have a need for a Fractional CFO who possesses specific expertise related to a one-time project need
Financial Planning – CFOs excel at planning, whether it is building your annual plan or a 5-year strategic plan to attract investors
Financial Analysis – Financial analysis can range from product/customer profitability, cash flow for 13 weeks or evaluating the financial strength of an acquisition target
Accounting – The CFO owns the numbers and oversees the core processes and results of the Accounting Department
Reporting – CFOs design the financial metrics and key performance indicators (KPIs) for the business. When done well, these numbers should create an appropriate anxiety to take action

When should I hire a Fractional CFO?

Companies hire fractional CFOs for a variety of reasons. Let’s take a look at some of the most popular reasons companies seek out a fractional CFO.

You can’t justify a full-time employee

Companies at $5mm to $75mm require some CFO services, but they can’t justify adding a high-cost, full-time CFO position to their payroll. Instead, an outsourced CFO usually bills by the hour (saving your company the high cost of salary plus benefits).

A fractional CFO can charge on an hourly basis or a monthly retainer (which typically ranges between $5,000 and $7,500 per month).

You need expertise for a one-off project

The CFO leads the way on a variety of legal matters. This could include some of the following activities:

Navigating an audit
Preparing for a sale or merger (Here’s how to write an exit strategy for your business.)
Applying for a bank loan
Adjusting a financial forecast
Raising debt and equity funding
Dealing with cash flow issues
Deciding how to cut costs

You need to temporarily fill in the gaps

If a company suddenly lost its CFO and needs a qualified executive to fill the seat while an extensive search is conducted, a fractional CFO can be an ideal solution. This need can also arise when a company is undergoing significant challenges that can make it more difficult to attract a full-time CFO.

What is Bookkeeping?

The process of bookkeeping involves referring to source documents (items like bills, invoices and receipts) to record all financial transactions within your accounting system. A bookkeeper will typically review the source documents in order to post income transactions (sales), expense transactions, inventory transactions and other accounting transactions in your accounting software. A qualified bookkeeper will free up valuable time so you can focus on business development, management and strategic decision making.

What is Accounting?

Accounting often includes bookkeeping but it can vary depending on the size of your organization. Accountants will prepare monthly, quarterly or yearly financial statements based on source documents (items like bank, credit card and loan statements) and the data prepared by your bookkeeper (if you have one). In some cases accountants will handle the bookkeeping and accounting functions as a consolidated service. Financial statements provide business owners with valuable information about their business performance including details on income, expenses, assets, liabilities and equity. Accountants often handle tax matters including payroll tax, sales tax and income tax. The process of accounting is usually focused on prior financial activity.

Can I do my own Accounting and Bookkeeping?

While today’s accounting software and automation technologies make it possible for many very small businesses to handle their own accounting internally you should ask yourself if that is really a wise decision. Do you have experience in accounting and bookkeeping? Do you know the difference between an asset, liability, equity item, income item or expense item? If you cannot answer with a resounding “YES” you probably should not do your own accounting and bookkeeping.

Even if you can do your own accounting and bookkeeping you may be hit with a significant “Opportunity Cost”. You may be missing opportunities to grow and develop your business if you are spending your time on the day-to-day accounting and bookkeeping functions.

What is a KPI?

KPI stands for Key Performance Indicator(s). KPIs are various metrics used to analyze business performance. To generate KPI reporting and analysis you must have accurate accounting records and financial statements. Using that data a KPI report can be generated to provide far greater insight into your overall business financial health. KPI reports often present your financial statement data in an easy to read graphic format. A skilled business accountant or CFO can use the KPI reporting and analysis to predict and adjust future business performance.

What is Business Intelligence?

Business intelligence is a fairly broad term that can encompass many different areas. For our purposes business intelligence refers to a deeper insight and understanding into the financial health and performance of your business. KPI reporting and analysis is a form of business intelligence.

FAQ