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Signs your Company needs the Services of a Fractional CFO

calendar29 Feb, 2024
timeReading Time: 4 Minutes
Services of a Fractional CFO

A fractional CFO is a Chief Financial Officer who is hired for a limited period. Whenever a company needs a finance officer, it can hire a fractional CFO to render its services for a limited time. The company can benefit from fractional CFO services as well as save money from a permanent CFO that can be used for other purposes like marketing, product/service development, etc. A CFO holds a very important place in any organization as the CEO. There are many Services of a Fractional CFO that benefit an organisation, one being that without their financial advice and implementation, no company can grow, and this is where their importance is felt. The basic accounting work is done by the permanent accountant hired by a company, but the financial decisions are taken by the CFO because these are very important and require expertise, which a CFO offers.

Signs your Company needs the Services of a Fractional CFO

These are the signs that your company need the Services of a Fractional CFO. You can opt for Fractional CFO services at these times – 

Business Growth

A business can benefit from the Signs your Company needs the Services of a Fractional CFO when the business is growing, and it is time for it to expand. A fractional CFO can be hired when it’s time to implement a financial structure in a way that complies with the existing laws of the country, generates profits, and helps in the expansion of business. Maintaining the finances of a business can have a lot of benefits for a fractional CFO. They ensure that the expansion plans are in line with the investment that a company can make and don’t exceed that.      

Capital Raise

The Services of a Fractional CFO need to be availed when a business has to raise capital. They are required to formulate a plan and determine how much funding a business requires for phase-wise growth after looking into the business’s books of accounts. Excess funding may cause unnecessary expenditure, and less funding will be of no use; hence, keeping in mind the expenses and financial transactions, the Fractional CFO regulates the strategy. The services of a Fractional CFO are needed for a short period of a year, where he is required to make strategies as per the financial law and finances of the business. The business can benefit from a Fractional CFO for determining the percentage of debt and equity to take while receiving funds from various sources.

Regulating Cash Flow

While a new business is set up, there are a lot of issues faced when regulating cash flow. Regulating the cash inflow-outflow is an important and tough task. Sometimes, the payment doesn’t come for several days, and the unnecessary expenses may increase. To keep this in line, a fractional CFO is hired to render his/ her services for keeping the cash flow in check. The Services of a Fractional CFO can implement cash flow strategies in such a way that it doesn’t impact the sales and, ultimately, the growth of the business while keeping the expenses in check.

Legal Compliance

The Services of a Fractional CFO constitute compliance with the law. There are many financial laws that the business needs to adhere to, like tax compliance, licensing, certifications, etc. There can be many legal penalties levied on the business if it is not in compliance with the law. To minimize those, the Fractional CFO is needed to make the business regulations in compliance with the laws and new regulations set by the government (if any). Taxation is also a huge part of a business, and it needs to be filed within the time limit prescribed under the Income Tax Act 1961.

Budget

The business can benefit from the services of a Fractional CFO while formulating the annual financial budget. The budget allocation in a required area of a business is very important to monitor for its growth. Expert guidance is needed to determine which area would be more beneficial to invest in. Suppose a business lacks personnel and the budget is allocated to the infrastructure, then it would be a waste of funds. There is a time when the budget allocation to a specific area will help the business, and that needs to be determined, and there is no one better than a Fractional CFO to do the job. Since they are hired when in need, they cost less, and the services they render would be the same as those provided by the permanent CFO.

Decision-making

One of the most important Services of a Fractional CFO is that they help the business make the best decisions like where and when to invest money, whether to go for a merger or amalgamation with another business/es, SWOT analysis of the business, etc.

Conclusion

Businesses need to avail services of a Fractional CFO, and is cheaper for them, and the services are similar, so it proves to be cost-effective to hire a fractional CFO. Appointing a fractional CFO makes the business growth sustainable, smooth, and in a linear way. Their usage should increase so that the business can perform financial tasks with excellence on a lower budget. Bigger companies require theServices of a Fractional CFOregularly, but the same is not the case with small entities, and hence, they can use their service when in need.

Corpbiz can help in the growth of your business by providing these financial services through a professional. We have a good pool of experienced and learned individuals who can guide you in the need for long- and short-term financial planning. 

Frequently Asked Questions

  1. When does a business require a permanent CFO?

    Generally, a business doesn't need a permanent CFO in the initial two stages of business setup. Till then, a fractional CFO would be of best use. Meanwhile, from stage three, when the business is involved in more financial transactions and is in line with growth, a CFO is needed.

  2. How does a business benefit from a Fractional CFO?

    Fractional CFOs are hired temporarily when there is a need for a business and perform tasks like revising the business strategies, making financial plans, and keeping the business in alliance with the laws of the state. This way, the businesses get their work done with comparatively less money than they would have paid to hire a permanent CFO.

  3. Who needs a Fractional CFO more?

    Fractional CFOs are needed mostly by startups or businesses that are in a growing stage since they are hired for a limited period and provide the same services as a CFO.

  4. Can there be more than one CFO in a business?

    Yes, there can be more than one CFO in a business if it is affordable for the business. They can provide their services distinctively as well as collectively. According to the business needs, if there are two CFOs, one can be used in devising the business strategies, and one can look into the books of accounts.

  5. Can a Fractional CFO be fired by the CEO?

    A Chief Executive Officer (CEO) can fire a Fractional CFO, but it is highly unlikely that he/ she would fire a Fractional CFO without consideration from the Board of Directors or the Chairperson.

  6. Can a Fractional CFO become the COO of the firm as well?

    Yes, a Fractional CFO can perform the responsibility of a COO as well and can take the role of a CFO-COO in the firm. This will reduce the cost of the firm, and the services rendered will be the same. However, this is good for small businesses and companies only since the responsibility and workload are less there. In a bigger organization, one should take their services separately to gain more benefits and work strategically.

  7. What are the beneficial services of a Fractional CFO for an individual?

    Being a Fractional CFO can benefit a person hugely. They gain exposure to working for many businesses and companies that give them the necessary experience in the field. They are hired temporarily, so they have a lot of time to invest in other business fields and gain experience.

  8. What are the disadvantages of hiring a Fractional CFO for a business?

    The disadvantage of hiring a fractional CFO for a business is that since they are hired only in times of business need, there is no CFO to manage the business needs on a day-to-day basis. In a desperate time of need, there can be no CFO for a business, and hiring one can also take time, so a business may miss a few opportunities to shine or sometimes face issues while dealing with finances.

  9. What is the major role of a Fractional CFO?

    The major role of a Fractional CFO in a business is to assist in managing the finances of the business, monitoring tax and law compliance, assisting in business growth strategies, etc.

  10. What qualification is required to become a Fractional CFO?

    To be a fractional CFO, you must take a graduate and undergraduate course in the finance sector. BBA and MBA are very good courses to pursue to become a Fractional CFO. 

Read Our Article: Elevate Your Startup’s Growth With Fractional CFO Services

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