Fractional CFO: Bridging the gap with in-depth financial expertise for business growth

Fractional or outsourced CFOs provide a valuable service to companies in certain stages, experiencing brand new issues. As you grow, you meet challenges that nobody on your team has dealt with before: broken processes, more complex reporting needs, and strategic decision making that requires “been there, done that” experience. 

These are all signs that you might need a CFO with executive leadership experience. But that’s a big step. Any new C suite member requires long-term commitment on both sides, and the search can be lengthy and costly. 

Which is where the fractional CFO comes in. They offer the experience and skills you need quickly, without the risk of making the wrong senior hire. 

This article explores the role itself and what it should deliver, how to know what to look for, and what to demand of them when you bring one on board. 

What is a fractional CFO?

A fractional CFO is an experienced finance professional who works on a part-time basis - per contract or project - rather than the traditional full-time schedule. They offer strategic financial and operational support to companies that don't require or aren't prepared for a full-time CFO or additional headcount. 

They serve two main purposes: 

1. Fill a temporary expertise gap in a company's finance function during critical phases such as growth and scale-up, expanding to new business ventures or systems implementation

2. Offer smaller companies without a CFO the benefits of experienced financial leadership at a fraction of a full-time role cost. This arrangement allows businesses to gain from top-tier finance expertise without the commitment to a full-time headcount. 

Crucially, this is different from an outsourced accountant. Fractional CFOs only justify their contribution if they stand apart from regular accountants or bookkeepers, and not solely focused on routine compliance or back-office tasks like bookkeeping and tax filings. 

Instead, their role is proactive, working at the frontline of a business to bolster operations and drive strategic initiatives. 

When to bring in a fractional CFO

In today's fast-paced business world, finding highly skilled professionals who can partner effectively with business owners and executives is increasingly challenging. You’re not only looking for a Certified Chartered Accountant or CPA who brings strong experience in managing day-to-day financial tasks, but someone who has also participated in scaling high-growth businesses, supported the strategic side and led transformative projects.

These profiles are scarce. Not every finance professional has had the opportunity to gain frontline experience. Many have backgrounds primarily in traditional accounting, controlling and reporting – tasks that either have been partially automated with modern software solutions or are heavily technology-enabled and don’t require the same level of manual intervention as in the past.

This scarcity has driven up salaries, especially for scale-ups or businesses undergoing transformation. To attract or retain such talent, companies often find themselves competing to offer high annual salaries, costly perks and, in some cases, equity.

As fractional CFOs for SMEs and Series A+ Startups at Valuefinex, our in-depth analysis has revealed several key gaps that prevent in-house finance professionals from transitioning into roles and responsibilities where they can add more value.

Regardless of the industry and business size, the most common gaps were: 

• Skill set limitations: This is due to the finance function focusing traditionally on transaction recording, controlling and reporting, with limited experience in strategic and front-line operations. This results in finance professionals having a strong technical background in accounting, but skills limitations on broader business strategy. 

• Cross-collaboration culture shortage: This isn’t exclusive to the finance function. Many companies operate in silos where there is limited collaboration between different business areas.  

• Efficiency problems: As businesses evolve, it’s natural for their volume and workload to increase. But the finance headcount doesn’t increase with expansion. This leads to a bottleneck where, unless the department is transformed with adequate tools and modern systems, the senior finance roles may find their time increasingly consumed by routine tasks limiting their involvement on the strategic side. 

These are the main reasons why your existing finance team members may not be ready for the step up to CFO, even on an interim basis. At the same time, the business may not be ready for a full time CFO and the associated salary, equity, and authority they require. 

In this case, a fractional CFO is the perfect bridge. The right person brings a wealth of expertise and experience from working with a wide range of clients. But your commitment to each other is limited, and you can afford to dive in more quickly.

What to expect from a fractional CFO

Onboarding any C-level executive - temporary or not - is always complicated. To help decision-makers overcome these challenges and fill the expertise gap, here are six things a strong fractional CFO or part-time Finance Director should do. 

These tips will be helpful for all kinds of businesses, whether you are an early-stage startup, a high-growth Series A+ or an established SME in a competitive environment. 

1. Emphasize systems transformation

In an era dominated by cloud computing and AI, having a finance department skilled in system utilization and transformational finance is crucial. You need a team that is not just knowledgeable but also experienced in modern financial systems.

In a previous article, we discussed how implementing a business intelligence tool can automate up to 70% of the time spent on management reporting in a typical finance department and solve the data-silos issue. This is just one example of the kinds of improvements a fractional CFO can make. 

Look for someone experienced in diagnosing poor systems and software, and who can upgrade your current finance tool stack. 

2. Maximize efficiency and level-up performance measurement

As you streamline your processes with suitable systems, your fractional CFO must use the time saved to provide valuable insights from your financial and operational data analysis. 

Don’t be satisfied with standard financial metrics. Go further by working on metrics that are truly critical for your industry and business success. What gets measured, gets done. 

3. Provide ad-hoc strategic support 

Your business will need the CFO's strategic input on crucial projects, like evaluating mergers and acquisitions, exploring new business ventures, or expanding into new markets. They can also help identify inefficient marketing and sales strategies, and spot your key growth levers.

The efficiency of your finance function plays a critical role here; the more streamlined it is, the more time your CFO will have to add value to strategic projects. 

4. Deliver value for money

Don't spend a high daily rate on an outsourced finance professional whose skills are limited to traditional finance and statutory compliance tasks. As noted above, a good accountant provides this at much lower cost. 

But the best fractional CFOs deliver real value, based on years of experience. So they’re worth spending real money on. Just avoid overpaying for limited expertise and isolated services. 

5. Seek proven scaling experience

For startups and growing businesses, a fractional CFO makes the most sense when you really ramp up. Your current finance staff won’t have been through this before, and you need someone familiar with the scaling process. 

Ensure that your chosen senior finance professional possesses the right skills and a successful track record in scaling operations and handling increased volumes. Scale requires different skill sets, involvement and planning.  

You’re not just looking for someone who’ll keep the lights on. They need to instill the right habits and processes to guide you through an awkward growth period. 

6. Look beyond pedigree

A strong CV and a good pitch are always enticing. But your ideal fractional CFO can show success working with companies like yours, which may not be world famous. 

When reviewing candidates, prioritize experience and roles that demonstrate an ability to actively engage with founders and executives in day-to-day business operations. Professionals with a background in top-tier corporations or consultancies often move into high-growth sectors, startups, and mid-sized companies, but may lack practical, hands-on experience.

A Fortune 500 management style may not be as effective in smaller or medium-sized enterprises. Here the stakes are different and require the ability to work closely with all the business areas – from product development and marketing to sales and operations. They need to break down departmental silos and lift performance across the board.

The best way to tell is through interviews. You’ll know pretty quickly whether or not they speak your language and understand your pain points. 

Crossing over: how to become a fractional CFO

Let’s finish by looking at the other side. For finance professionals seeking to work on a project basis and partner with founders or CEOs needing your expertise, it's never too late to change your career path. 

For those prepared to step away from the conventional nine-to-five job and pursue a more fulfilling and flexible role, the transition to fractional CFO can be a rewarding leap. 

On top of your traditional finance & accounting certification such as ACCA, CA or CPA, and relevant experience path, the role demands continuous skill development, specialization in niche areas, client relationship management, and strategic networking of your services. 

And obviously, the more you can master those six factors above, the more likely you’ll be to find and thrive in these roles. 

If you can make them work, fractional and advisory roles open your impact beyond what you’d get at any one company. It's a career path that offers not just variety and challenge, but also the satisfaction of directly impacting the growth and success of multiple businesses.

About Farhan

Farhan Qamar is a Certified Chartered Accountant (ACCA) who serves as a Business Finance Partner at Valuefinex, a promising and disruptive outsourced CFO services provider in the UK. With over a decade of experience, he has proven expertise in leading finance departments in both high-growth startups and multinational companies. He has directed finance functions at high-growth, Series A tech startups, and contributed towards financial operations control at Morningstar, a global leader in investment research. 

His most recent achievements include the authorship of a whitepaper on Power BI for finance professionals, leading implementation of systems, and helping companies transition to a subscription-based SaaS from traditional one-off contracts.