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The Role of Fractional CFOs in Small Business Growth

Fractional CFO's (Chief Financial Officers) have become a popular way for small businesses to have expert accounting, financial management and advice, at a fraction of the cost of a full time CFO. The purpose of this article is to help you understand the exact role of a Fractional CFO in a small to midsize business and how they can help you grow your net income by developing strategies based on what is financially occurring in your business.

Simply put, the role of a Fractional CFO is to provide a high level of strategic and financial advisory services for business clients based on the management of the accounting and the finance role they provide.

They help businesses where they need help the most, the financial management of the company. This can range from budgeting, cash flow management, forecasting, financial reporting, to providing investors financial reporting, plus much more CFO value.

Fractional CFO Roles

The following list of roles is not all encompassing, but it will give you a good sense of what a Fractional CFO's role is in your company. A more comprehensive list of a CFO job description is located on the services tab.

Secondly, not all of this work is done by every Fractional CFO position.

For example, you may already have a bookkeeper that does the basic accounting for your business. A Fractional CFO is not going to have to do the lower level accounting work and can focus on analyzing the data and providing in depth feedback to the owner.

But, if they have to, a Fractional CFO should be able to do the entire spectrum of accounting from software implementation and journal entries to finance management, and everything that touches accounting in between.

First and foremost, a Fractional CFO will be able to take any accounting situation, or lack thereof, and be able to put Humpty Dumpty back together again. In other words, regardless of the condition of the accounting currently, they will be able to fix the data so that correct information is flowing through the books and onto the users of the financial information.

Another role of a Fractional CFO is to develop all accounting processes to create a streamlined accounting environment. This means that, through every step that a dollar goes through in the business, there needs to be a process implemented to decrease risk of fraud or loss and make sure that the financial statements are represented correctly.

Financial statement analysis is a very important part of a business's sustainability and growth. Unfortunately, many small business owners have no real idea what is fiscally happening in their business. A Fractional CFO will take the accounting information and put together a month end and year end analysis that will inform you of exactly how your business is doing financially and what steps to take to create growth.

Being able to manage the company's cash flow is a huge part of success. Just like your personal life, timing of cash is going to affect your overall cash balance. Same thing with your business but do you really have the time to understand your cash flow? The Fractional CFO will manage the cash flow of the company because they understand the cash cycles of the business and are in the details to be able to monitor what is going on and use the cash to create more opportunities. When the cash isn't being looked at, mistakes happen that can be costly.

What if your business needs money? The Fractional CFO should be running the financing activities of the company. Since they are the expert of the accounting, they are the keepers of the information that will be provided to the lending institution you are using to borrow cash. This not only means that they are providing the information, but also understanding the differences of loans and the exact financial impact a particular financing situation will bring to the Balance Sheet. As with working with the buying and selling of businesses, the CFO will be the one negotiating and structuring the loan with the bank so, interpersonal skills are important.

Some small business owners think that the only reason accounting exists is to file taxes. There is much more value in an accountant than that, but, filing taxes is a role that a CFO needs to take on. They will take on the responsibility of providing the information to a local tax firm and engaging in a discovery process with the tax accountant to focus on the accuracy of the tax return and any tax savings. Some Fractional CFOs may be able to do the tax return themselves, but it really depends upon the complexity of the return and if the accountant is up to date on tax regulations.

A Fractional CFO also helps people sell and buy businesses. Therefore, the accountant needs to be able to help during the entire life span of the deal. This person needs the interpersonal skills to work with others that are trying to get the best deal they can, so the ability to negotiate is a great characteristic for this type of work.

Finally, Fractional CFO's are a great solution for startup businesses. Usually, the startup is working with a minimal budget and needs someone to set up the accounting department; the accounting software, structure, processes, etc.. The key is they are able to scale an accounting expense that coincides with the business growth.

Again, there are many things that CFO's can do but, in general, they should fall into the buckets described above.

So how does a Fractional CFO benefit a small to midsize business? Growth!

Without someone managing and understanding your accounting, it is very difficult to make the right decisions to grow the business. Your Fractional CFO will be able to provide you with the information that will create opportunities to grow revenue, cut expense, or both. They also can help you understand the business cycles in your livelihood in order to manage your assets the most effective way. The opportunities are endless when someone that understands the language of money, is part of your team.

As a Fractional CFO myself, I have a ton of experience in all areas above and have been able to provide solid and exceptional CFO level services to my clients for many years, and at a price that works for the business. Hit me up if you would like to discuss your needs.

Whether you and I create a relationship, or it's with someone else, just be sure to have someone that can provide this CFO role in your business. It is important.

Blue Collar CFO


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