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Fractional CFO Services – An Overview

A fractional CFO is a part-time employee hired to solve complex financial problems within the organisation. Fractional CFO services include offering assistance with leadership and strategic management, especially during transitional times or while delivering specific projects. Fractional CFOs offer their services, expertise, and guidance without committing to a full-time employment opportunity.

Their job is to revive businesses by achieving their goals within the periphery of the specific budgetary allocations. They not only help organisations overcome their financial challenges but also accomplish objectives, boost strategy, execute systems, raise funds, and manage audits/transactions.

What is Fractional CFO?

A Fractional CFO, sometimes referred to as an Outsourced CFO, is a finance professional who offers specialised services to an organisation on a part-time arrangement or project basis.

A fractional CFO’s responsibilities are not limited to bookkeeping and go beyond the basics. This role involves developing a solid financial model, managing cash flows, creating financial strategies regarding equity and debt, and creating annual budgets, among other things.

Top 5 Characteristics of a Good Fractional CFO

A Fractional CFO is responsible for resurrecting a Start-Up from its financial woes and taking it on the path of growth and scalability. Therefore, he must be a person with not just years of experience but also with certain characteristics. Here are the top 5 characteristics of a good Fractional CFO:

  1. Expertise – Must have extensive knowledge of financial management across different industries.
  2. Adaptability – Must be quick to understand and adapt to the dynamics, specific needs, and challenges of the business.
  3. Communication Skills- The candidate must be a good communicator, able to break down complex financial concepts and convey them clearly and effectively to all stakeholders.
  4. Analytical Skills – Must be able to provide financial insights for decision-making using his analytical skills.
  5. Flexible & Responsive – Must be flexible and responsive to offer services in a dynamic ecosystem.

What are the Benefits of Fractional CFO Services in India?

Hiring a Fractional CFO has many benefits for a Start-Up. Let us explore in detail the benefits of Fractional CFO services below:

  1. Cost-effective- Hiring a Fractional CFO is a cost-effective alternative, especially for Start-Ups that are running tight budgets and can’t afford to hire a full-time CFO with a huge salary package.
  2. Budgeting & Accounting – A fractional CFO helps create an accounting model that fits the budget, thereby fixing salary, cost, and expenditure issues. It is one of the significant benefits of Fractional CFO services.
  3. Enhanced Profitability – The Fractional CFO is responsible for helping the organisation use its resources judiciously to eliminate wastages. It’s one of the prime benefits of Fractional CFO services.
  4. Critical Feedback—A Fraction CFO is responsible for offering valuable insights into the company’s finances and operations by identifying the key performance indicators (KPI).
  5. Risk Assessment—A Fractional CFO identifies impending risks and offers solutions to mitigate the threats to the organisation based on his assessment.
  6. Focus on Success- The Fractional CFO monitors the market in real-time to develop a framework based on his assessment to execute the success model.
  7. Strategic Growth Mentorship – A Fractional CFO evaluates the business to develop a customised & sustainable plan and market strategy for the growth of the organisation.
  8. Investor Access—The fractional CFO plays a pivotal role in the decision-making process of identifying investors' options for the organisation, which in turn drives business growth.
  9. Business Valuation—A fractional CFO assists in business valuations of assets, liabilities, and securities and in analysing market equity and debt instruments.
  10. Structuring Organizational Hierarchy –The Fractional CFO is authorised to adjust the hierarchical structure of the organisation to boost its growth.  

What is the Role of a Fractional CFO in India?

Although a fractional CFO is not a full-time employee of the organisation, he brings experience and expertise in dealing with the organisation's financial problems. In a highly specialised role, the Fractional CFO helps the organisation:

  • In developing the strategic planning to fix the existing issues.
  • In determining the key performance indicators, the effectiveness of the business operations must be analysed.
  • In creating comprehensive business plans and detailed pitch decks to raise funds.
  • In developing a compliant financial model to check the performance of the business, projects, assets and investments.
  • In helping the business solidify its market valuation.
  • In setting up Mergers & Acquisitions (M&A) due diligence process for healthy evaluation of target companies.
  • In developing a Virtual Data Room (VDR) or Deal Room, a secure online repository used during M&A. VDR helps store and share confidential documents required for the due diligence process.
  • In preparing the Forecasting and Budgeting with variance analysis. While forecasting and budgeting helps predict the future financial performance of the business, the variance analysis helps compare predictions to actual results to identify discrepancies.
  • In fixing cash flow management, this process comprises monitoring, analyzing, and optimizing the organisation's cash flow to ensure liquidity.
  • Managing banking relationships through negotiations involving business terms, financing, account, and warranting compliance though a series of financial agreements and regulations.
  • In leveraging business intelligence for analysis of financial data, performance improvement, strategic decision making, and driving informed decisions and financial plans.
  • In overseeing Financial Planning and Analysis (FP&A) by offering valuable inputs on important business aspects such as budgeting, forecasting, performance monitoring, and strategic financial decision-making processes.
  • In preparing financial reports and presentations to all the stakeholders to ensure the seamless communication of financial insights.
  • In offering decision support through the analysis of financial data to support strategic insights for making informed business decisions.
  • In leading business negotiations after duly analysing financial propositions, arranging deals, acquiring favourable terms, and ensuring alignment with strategic business goals.  
  • Is responsible for managing relations with investors by communicating financial performance, maintaining transparency, addressing stakeholder concerns and fostering confidence in business strategy.

Fractional CFO vs Full Time CFO

Most Start-Ups work in a very challenging environment and business landscapes. They have limited budgets and often look forward to cost-effective, flexible resources and expertise to manage their daily operations and finances. A Fractional CFO can prove to be a disrupter helping them scale their business with limited available resources.

Let’s take a look at the reasons why Start-Ups should hire a Fractional CFO over a Full-Time CFO:

  1. Employment Status – A Fractional CFO is a part-time employee of the organisation and can work for more than one organisation at one given point in time. A Full Time CFO is a committed employee of a single organisation bound by the organisation to not lend his service to any other organisation while working for it.
  2. Remuneration Status & Overhead Expenditure—A Fractional CFO is hired on a need-basis, and his compensation is limited to the period of service lent to the organisation. However, as a committed employee, a Full-Time CFO is paid annual remuneration, which costs the company annually. A Fractional CFO is a cost-effective solution to save overhead expenditure.
  3.  Hiring & Availability—A Fractional CFO is available immediately, and the hiring process is relatively easy and short. Hiring a Full-Time CFO is a tedious task and takes a long time. Besides, a Full-Time CFO who intends to join a new place of work may have to serve a notice period, which means his availability is not immediate in such cases.
  4. Hiring Risks—A Fractional CFO is not a permanent employee of the organisation, but his hiring exposes the organisation to the hiring risks associated with senior leadership. As such, the organisation can use this experience to fix the loopholes. However, hiring a Full-Time CFO comes with inherent risks and gives no scope for improvement to the hiring team.
  5. Flexibility—A Fractional CFO is the perfect fit to manage the dynamic financial landscapes of Start-Ups, as they can hire on a need-basis. However, a Full-Time CFO does not offer such hiring flexibility. 
  6. Scalability – A Fractional CFO can adjust well to the changing financial needs of the Start-Ups since his hiring is on need basis. However, as a permanent employee, restructuring a Full Time CFO in case of changing economic landscapes is challenging.
  7. Business Valuation – A Fractional CFO is experienced to help boost the organisation’s valuation much before a Full Time CFO can be hired.
  8. Readjust Focus – A Fractional CFO allows the organisation to outsource its financial management while readjusting its focus on core competencies by senior leadership. However, with a Full Time CFO the focus remains divided. Thus, modern-day businesses prefer Fractional CFO services.
  9. Risk Management—A Fractional CFO’s immediate availability during financial crises makes him a better fit to manage risk than hiring a Full-Time CFO in a similar situation.
  10. Networking – A Fractional CFO is exposed to a huge professional network including bankers, auditors, and taxation experts thanks to his association with multiple organisations. His contacts can be leveraged by the Start-Up in times of need. It may not hold true for a Full-Time CFO.

When Should You Avail Fractional CFO Services?

Start-Ups are mostly working in a dynamic environment with ever-changing financial landscapes. They aim is to scale up business, boost growth, invite investment, reduce cash flow issues, and plan strategic moves such as mergers and expansions. However, given their budgetary challenges, when Start-Ups realise that hiring a Full Time CFO is expensive, they can opt for Fractional CFO services, who handles the financial issues with same expertise as a Full Time CFO but at a much affordable cost.

Top Fractional CFO Services that your Business Needs

Start-ups need to avail the Fractional CFO services to benefit from his experience in the financial domain. His expertise can be availed at an affordable cost on a need basis to manage the business’s strategic planning, cash flow management, and scalability issues. Some of the top Fractional CFO Services that businesses need include:

  • Financial Planning & Analysis
  • Cash Flow Management
  • Strategic Financial Guidance
  • Fundraising
  • Investor Relations
  • Financial Reporting & Compliance
  • Risk Management
  • Developing Financial Systems

How much does a Fractional CFO Cost?

Most Start-Ups require 15-25 hours of CFO Services, and therefore, a Fractional CFO is a perfect match for their business requirements. The cost of a Fractional CFO in India varies on the basis of different factors such as years of experience, scope of services, business needs, duration of service, and complexity of the project.

In general, the fees for a Fractional CFO can range anywhere between INR 50,000 to 2, 00,000 per month, and even more. However, the mode of payment can be fixed on:

  • Hourly Basis – The Fractional CFO can be paid on the basis of the number of hours worked.
  • Monthly Basis – The Fractional CFO can be paid a flat monthly salary irrespective of the number of hours worked during that month.

Why Corpbiz?

Corpbiz is a team of professional experts with years of experience providing Fractional CFO services to Start-Ups and other businesses in India.

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Frequently Asked Questions

The CFO is the organisation’s Chief Financial Officer and the highest-ranking accounting expert. He is responsible for financial management and strategic decision-making within the company.

A fractional CFO is an experienced CFO consultant hired on a part-time or contractual basis to offer financial expertise to an organisation.

Yes. Fractional CFO Services are beneficial for Start-Ups as they offer the same financial service to the organisation but at a much lower cost than that of a Full-Time CFO.

Hiring a Fractional CFO has multiple benefits, especially for a Start-Up or an organisation struggling with financial issues. Some of the benefits include an easy hiring process, immediate availability, cost-effective remuneration, and the same expertise and experience as a Full-Time CFO.

The roles and responsibilities of a fractional CFO and a full-time CFO are the same. However, the difference lies in their hiring and remuneration. While a Fractional CFO is hired swiftly and joins immediately, his remuneration is based on the hours worked or in accordance with the project needs. On the other hand, hiring a Full-time CFO is an exhaustive process, and he may not be available to join immediately. His compensation is fixed on an annual basis, adding to the cost of the company.

A Fractional CFO heads the finance team and aims to fix the financial management and strategic flaws with his expertise in the domain. His role includes:

  1. Financial Planning & Analysis
  2. Cash Flow Management
  3. Strategic Financial Guidance
  4. Fundraising
  5. Investor Relations
  6. Financial Reporting & Compliance
  7. Risk Management
  8. Developing Financial Systems

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