12 benefits of a fractional CFO you didn't know you needed

CFOs focus on financial operations, management, and strategic planning to aid founders in decision-making. At many companies, a CFO is a full-time, salaried employee, working solely on advising one business. 

For early-stage startups carefully managing their funds, this likely is not an option due to the high salaries associated with a full-time, experienced CFO. 

But if you’re in this scenario, you still need someone to play that vital role in order to move your startup towards growth. A fractional CFO service may be the answer!

A fractional CFO, sometimes called an interim CFO, is a financial professional who can bring an expert level of financial knowledge to your business. They provide the experience, tools, and resources you need to reach your goals while ensuring the numbers are in order — without breaking the bank.

While a CFO offers many of the same services as a fractional CFO, the main difference is in the time commitment. Fractional CFOs are typically part-time and outsource their services on an hourly basis.

The big question is, do you absolutely need to hire a CFO? We say, can you afford not to?

12 benefits of a fractional CFO for your startup

Now that you know a bit more about what the right fractional CFO can do for you, let's go over some key benefits:

1. Improved investor and board relationships

Investors and stakeholder boards expect efficient financial management. Having a fractional CFO on your team can help strengthen relationships with these key stakeholders and ensure they're comfortable trusting you to provide financial transparency. 

Additionally, if your startup is hitting speed bumps, your CFO will find solutions and present them to the board.

2. Expertise in startup fundraising

Startup fundraising can be tricky, and one of the biggest challenges startups face. But, a fractional CFO can bring the expertise your financial operation needs to make it easier. 

They can help you build your investor presentation, set financial goals and budgets, and identify potential investors.

3. Gain a better understanding of financial health

Running a business means monitoring all the numbers for accuracy and compliance. A fractional CFO clarifies complicated financial data and constructs different types of financial projections based on the data. 

For example, CFOs use cash flow projections to help founders understand how much money is coming in and out of the business and where it is coming from.

4. Strategize for long-term goals

A fractional CFO can help you look to the future by strategizing toward your goals. They can help you develop strategies to ensure your business is on track for long-term success and pursuing its ultimate ambitions. 

For example, by creating a financial forecast and meticulously tracking financial performance KPIs, founders are better positioned for rapid growth and expansion in the face of complex financial challenges. 

If you know you need to purchase updated equipment as your business grows, a fractional CFO will help you build a plan to fund the needed purchases. 

5. Make more informed financial decisions

Having an interim CFO on your team can be incredibly helpful when making financial decisions. The amount of financial data companies require, and track can be overwhelming. 

Instead of getting lost in the numbers, you can focus on making data-backed decisions based on what your fractional CFO provides.

They analyze current and historical data to provide transparency and definitive information. Financial projections come into play here, too.  

6. Keep financial tasks from becoming overwhelming

Financial tasks become overwhelming when you don't have experience. Even budgets can quickly become a hassle when you struggle to stay on top of the numbers. 

That's where a fractional CFO comes in. 

They can handle whatever financial challenge you’re facing, including tasks like budgeting and cash flow management. With company internal controls in place, you can focus on other aspects of the business.

7. Specialized financial services

Specialized fractional CFO services can help you overcome financial complexity and reach your goals. All startups are different. 

SaaS-based startups, for example, have different revenue recognition. Because of this, their focus is customer based. A CFO can monitor customer-specific KPIs to help assess future profitability. 

They can help with mergers and acquisitions, corporate restructuring, strategic planning, budgeting, and financial forecasting, as well.

8. Ability to scale finances easily

As your business grows, you need someone to help keep up with the changing financial landscape. Growth means more transactions, additional expenses to keep up with production scaling, and more. 

 A fractional CFO can provide the financial knowledge and expertise you need to scale your finances to fit the growth of your business. 

With financial planning and risk management, you can ensure your business stays in the black as you scale up.

9. Access to financial tools and resources

Fractional CFOs are experienced professionals who know how to get the most out of financial tools and resources. 

They can help you access the right tools, such as financial software and data analysis tools, to streamline multiple financial processes.

For example, accounting software alleviates manual entry and daily tasks needed for proper accounting. Fractional CFOs research options thoroughly to pick the right software for your startup. 

10. External perspective on financial strategy

Internal teams can sometimes be biased when it comes to making decisions. An outsourced CFO can provide an external perspective on your financial strategy and help you make sure that every financial decision is made through verified research and data. 

11. Access to industry best practices

An experienced fractional CFO brings a wealth of knowledge to your team, which can be invaluable when making strategic financial decisions. Due to their flexibility, fractional CFOs have experience in many different verticals and industries. 

On the other hand, traditional CFOs tend to stick to a single industry and don’t move as often. They may have certain core competencies but no experience in your niche.

Startups tend to have specific financial needs, like SaaS-based startups. If a CFO hasn’t worked with that specific business model they won't provide in-depth expertise. 

Fractional CFOs with startup experience typically work with a variety of startups. Hence, their wide-range industry experience.

Fractional CFOs can guide founders through best practices for startup accounting and bookkeeping as well as helping you prepare for any potential financial risk. 

For example, the current economic state has many large and small business owners tightening their budgets. Without advice from a CFO with startup experience, founders may be unable to fully prepare for this kind of change.  

The accuracy of financial statements is essential for tax purposes. Rather than scrambling at the last minute, your CFO can instate tax management early to avoid bottlenecks. 

12. Improved cash flow management

Cash flow management is essential for the success of any business, and a fractional CFO can help you manage it more effectively. An unbalanced AP and AR lead to trouble when the scale tips towards AP. 

Expenses that become unpaid debts strain vendor relationships and put your company deep in the red. Instead of waiting for a molehill to become a mountain, CFOs adjust budgets and focus on improving revenue beforehand. 

Full time CFO vs fractional CFO cost

The cost of fractional CFO services is significantly less than that of making expensive financial decisions without the proper guidance. 

Fractional CFOs typically get paid hourly since they are part-time or work per project. 

On average, the hourly rate for a part-time CFO is $300. Startups that hire fractional CFOs average between $5k and $8k for 15-25 hours of work. Some outsourced CFO services run a monthly fee based on assumed hours. 

Full-time CFOs require a high salary, an average of $420k per year, plus benefits. Add in an accountant and bookkeeper you’re going to pay over $500k to assemble a financial team. 

Is a fractional CFO worth it?

Startups can get overwhelmed with managing their finances on top of other responsibilities. Accurate, real-time financial data and strategic financial insights can mean the difference between make-or-break decisions. 

But, an in-house finance team with a CFO comes with a price tag of hundreds of thousands of dollars in salaries and benefits.

A fractional CFO for startups provides the insight, expertise, and resources needed to keep your finances in order without needing a full-time team or a significant financial commitment. 

With their full range of services, you can rest assured that your finances are in capable hands.

We wouldn’t have been able to expand without hiring a fractional CFO to help us manage our finances. Prior to Zeni, we were able to build and sell two successful startups because of our CFO’s expert advice and financial management. 

We’ve seen hundreds of startups run with a skeleton budget, but the startups that hire a seasoned CFO are the ones that end up making critical hires, well-informed business decisions, and raising funding when needed. 

Ultimately, these startups can go public or sell their startup compared to startups that tend to their own slim budgets.

Running a startup is a delicate balance between managing money and making critical hires to move forward. A fractional CFO gives you the financial expertise you need on your budget.

The cost of fractional CFO services is significantly less than that of making expensive financial decisions without the proper guidance. 

For startups, the benefits of having a CFO on your team ensure you're moving forward one step at a time. 

‍