Fractional CFO: when does it make sense?

What a fractional CFO is, what it is not, and when an experienced CFO a few days a month is the right choice.

What is a fractional CFO?

A fractional CFO is an experienced CFO who works for the company part of the time, typically a few fixed days a month. The role is the same as a full-time CFO's: responsibility for the finances, the reporting, the liquidity and the financing. The difference is the scope.

The term comes from "fractional" in the sense of a fraction of the time. In Denmark it is also called an external part-time CFO or a CFO for hire.

What a fractional CFO is not

A fractional CFO is neither a bookkeeper with a bigger title nor a consultant who delivers a report and leaves. The difference lies in the responsibility. A fractional CFO sits at the table, knows the business and stands behind the numbers in front of management, the board and the bank.

When does a fractional CFO make sense?

The company has outgrown the bookkeeper but not yet grown into a full-time CFO.
You need to raise capital or renegotiate with the bank.
The board is asking for better reporting and a sharper basis for decisions.
Liquidity is tightening, and decisions have to be made on an informed basis.
A sale or a succession needs to be prepared.
An investor wants the finances of a portfolio company under control.

What these situations have in common is that the decisions are big, while the need for a CFO does not fill a full position.

When a fractional CFO is not enough

When the finance function requires daily leadership of a larger team, or when the company is so complex that the CFO role fills every day, a full-time CFO is the right choice. In that situation a fractional CFO can help define the role and find the right person.

Fractional CFO or interim CFO?

A fractional CFO is an ongoing part-time collaboration. An interim CFO steps in full time for a defined period, for example when the permanent CFO leaves or during a transaction. Many start with one and continue with the other. Read about interim CFO.

What a fractional CFO typically handles

Budgets, liquidity forecasts and scenarios that tie in with the strategy
Monthly management reporting with the key figures that run the business
Dialogue with the bank and investors
Board material and presenting it
Leading the finance function, its processes and systems
Advising management on the decisions that have financial consequences

What to look for

Experience from the same stage. A CFO who has done it before in a company like yours knows where the pitfalls are.

Responsibility rather than advice. Ask who stands behind the numbers when the board asks. The answer should be the person themselves.

A firm behind the person. Tax, accounting, payroll and transactions require specialists. A fractional CFO with a firm behind them can draw on those specialists without you having to coordinate.

Confidentiality. A CFO sees everything. That requires someone you trust.

A clear agreement. Scope, responsibility and what should be achieved by when, written down from the start.

Fractional CFO at Summ

At Summ, a partner steps in as fractional CFO. Behind the partner stands the whole firm: tax, accounting, payroll and transactions. Read about CFO services at Summ.

Speak to Deniz Patilovski about where your company stands and what lies ahead.