Evaluating whether to add Fractional CFO services to your team? Now’s the time, as the right hire can have a tremendous impact on your company’s financial stability and, ultimately, success. But hiring Fractional CFO services isn’t as straightforward as with other executive positions – rather than a potential candidate simply selling themselves on their capabilities and experience, it’s up to you to do a careful evaluation and decide if they are the right fit.
What Is A Fractional CFO?
A Fractional CFO is a Chief Financial Officer or CFO, but on an as-needed basis. This type of financial officer works with a company part-time, usually no more than a few days a week. It is becoming increasingly popular with startups through middle-market growth companies, as it allows the business to use its budget to pay for world-class advice when needed, as opposed to hiring a full-time employee with potentially less experience.
Many experts argue that having the guidance and expertise of a part-time CFO can be beneficial for companies in need of financial assistance. The part-time arrangement allows for greater flexibility, cost saving, and access to strategy that is often only available to larger companies. Moreover, since modern business environments are constantly changing, having such access can help when responding quickly to market changes or sudden developments.
Ultimately, it will depend on the individual business whether hiring Fractional CFO services is worthwhile – decisions should take into consideration the amount of experience needed, what goals must be achieved in their role, and the capacity of the organization’s finance staff. With this being said, it is important that business owners considering engaging the services of a Fractional CFO go beyond identifying technical qualifications and understand precisely what qualities to look for when choosing one.
So, what to look for when hiring Fractional CFO services? From their experience with financial strategy to their risk assessment ability to, most importantly, their understanding of your corporation’s financial goals (more on this later)… here are a few key criteria to consider when hiring Fractional CFO services.
General Qualifications
It is essential that a potential candidate has had a successful tenure in finance roles within other businesses. It’s not enough for them to have just been responsible for managing budgets or coordinating payroll or being a controller; they must be able to provide concrete evidence of their success in growing top line and bottom line, and managing cash for a variety of organizations. The hiring decision-maker should ask questions about financing strategies that have been implemented by the candidate in past positions, and inquire about innovative ideas harvested from previous projects that could apply to this role.
As intangible skills like interpersonal values or corporate vision alignment become increasingly important for top leadership roles, understanding which qualities to prioritize in potential hires will ensure careful consideration in choosing which candidate fits best. Consequently, succeeding this section we’ll dive deeper into creating an effective roadmap to find just the right fit for your company’s unique needs. Speaking of which…
What Exactly Does Your Business Need?
This is the logical place to start. It’s difficult to know what to look for when hiring Fractional CFO services if you haven’t determined the exact needs of your company.
For example, are you looking at a potential M&A (Merger & Acquisition)? Are you wanting to expand your business and need help identifying potential growth opportunities? Do you need professional guidance to raise equity? Does your company need expertise in FP&A (Financial Planning & Analysis)? How about an expert to interpret your company’s data in order to develop a strategic plan? Do you need professional guidance when making the critical decisions for your company?
All of the above?
It’s important to start at the beginning by nailing down what exactly your business needs, before looking for someone to fill the role.
Qualities To Look For When Hiring Fractional CFO Services
Now that we have discussed the concept of a Fractional CFO and the importance of determining the precise needs of your company, let’s move on to what specific qualities to look for when hiring such an executive.
First, it’s important to make a distinction between the role of a controller and the role of a CFO. The controller of a company is embedded in historical information, executing such routine financial tasks as budgeting and reporting. The controller, the accounting team, risk management, insurance… these are all important functions within a company, to be sure. But these are not functions that are executed by a CFO.
Even though any CFO can produce a budget or a report, a CFO’s value is in the management of these functions and the interpretation of the results in order to make strategic decisions with company leadership (the CEO). So the CFO oversees or manages all of these other important teams within the scope of the expertise they provide.
The key difference here is that the CFO is a strategic thought-partner to the CEO of a company. The CFO will take the data that is produced by the controller and the accounting team, analyze and interpret that data for the company’s leadership teams to understand, and then use the results to make strategic decisions together with the CEO for the future growth and financial betterment of the company.
Once you are clear on this important distinction, the task of finding the right person to fill the role you need filled becomes much easier.
In addition to strategic and financial expertise, it is important for the Fractional CFO to possess strong communication skills so they can effectively express the organization’s financial goals, and how to achieve them, to stakeholders. A good candidate will not only have experience dealing with large volumes of data but also the ability to translate this data into an understandable format. They should also be able to advise other executives on the most beneficial investments or strategic financial moves.
The Fractional CFO should be able to create strategic business plans while staying within budget constraints, identify long-term financial projections to achieve company goals, and recommend rates and terms for financing. As well, they should have a fundamental understanding of how best to leverage technology in order to reduce overhead costs and maximize profits without compromising quality.
Finally, before engaging any potential candidate for this position, make sure you thoroughly vet them for their qualifications as well as their values and ethical practices when dealing with financial decisions. Remember: bringing the wrong person on board could be costly for your organization, not only financially but in overall productivity and efficiency.
Before moving forward with your search for a suitable Fractional CFO, it is important for executives at every level of an organization to understand their own corporate financial goals. Why? Knowing these goals will help you identify which candidate best fits your needs in terms of capabilities, experience and values.
Understanding Of The Corporation’s Financial Goals
Perhaps the most critical trait to look for in a Fractional CFO is an ability to understand and strategize for the corporation’s financial goals. If a potential candidate cannot clearly demonstrate and communicate their understanding of those goals, they will not bring the necessary value to bear on the position. There is no such thing as a one-size-fits-all strategy in finance, and having a CFO who can recognize what successful strategy implementation looks like for your particular business is paramount.
It is important that prospective hires be able to describe why and how their experience sets them up for success in helping you achieve your company’s overall objectives. Ask targeted questions about past work related to similar goals and gauge if the answer reflects an innate understanding of what contributes to successful goal execution. Keep an eye out for Fractional CFO candidates who have prior experience in developing complex strategic financial plans, and endeavor to find someone with the expertise and background knowledge to help you meet those goals.
Whatever level of industry experience you need, it is crucial that potential candidates demonstrate that they can think on their feet: someone who understands your industry trends and nuances as well as current best practices should be looked upon favorably. An astute CFO candidate should be able to readily discuss proactive and clever solutions as dictated by their experience, even when those decisions must be made quickly if the company needs to pivot due to market trends.
Having established that understanding of your corporate financial goals is critical, it is equally important that potential hires have professional experience in data analytics; this will be our focus in the next section.
Professional Experience In Data Analytics
When assessing potential Fractional CFO services, understanding their professional experience in data analytics is key. They should possess an in-depth knowledge of financial analysis, forecasting, and budgeting, as well as experience in monitoring and interpreting operational metrics. An experienced Fractional CFO should also be able to identify cost savings and growth opportunities and create analyses showing how they will improve the bottom line.
Much like it is important to understand the financial goals of the corporation, it is equally important that someone who fills a Fractional CFO position is able to accurately assess the short- and long-term impacts of those goals for the organization, and communicate that information in an understandable way to both the leadership team and stakeholders.
Ensuring that the right person is brought on board can make all the difference in achieving great success for your company. With research into their professional track record, you can better understand how they might further contribute to your organization’s financial objectives while also keeping current on market and industry trends. Having seen how they approached things with another company can give invaluable context into how they will act with yours moving forward.
Expertise In Financial Strategy
The next key requisite in hiring a Fractional CFO is understanding financial strategy. Financial analysis helps to ensure that short-term and long-term goals are attained and monitored, while budgeting acts as a guard against overspending or taking on too much risk. Expert knowledge in this realm is critical to achieving overall organizational success.
Budgeting includes periodically forecasting, which requires rapid turnover of data and a keen ability to interpret operating results, industry and world economics, and other factors, to ‘see’ strategically how that data combines and will impact your business, and what then needs to be done. The Fractional CFO should be able to interpret all the data points and advise a path forward.
But a good Fractional CFO will take it several steps further. Understanding the budgeting and reporting aspects of financial strategy is important, yes. However, where Fractional CFO services show their true value is advising on strategic growth planning based on that data, using the data to spot opportunities for growth within the industry, and partnering with the CEO of a company to make those critical decisions that will achieve company goals and drive the business forward.
While identifying financial strategy can seem daunting at times, to those without the experience to do so, proficiency in these areas will prove essential when making informed financial decisions within the organization, as well as enabling communication of those decisions to vital stakeholders. It is for this reason that it is necessary for a Fractional CFO to have a thorough grasp of this concept – only through expertise may robust profitability plans be created and achieved successfully.
Having an astute understanding and ability to identify the appropriate financial strategy to grow a company can make all the difference between success or failure for any organization. To continue on this path towards sound financial decision-making and practice, having an experienced eye in understanding decisions and advice can go a long way towards better business outcomes.
Understanding And Imparting Of Decisions And Advice
In addition to the budgeting and reporting management expertise that a Fractional CFO should possess, it is essential that they are also capable of understanding and imparting decisions and advice. An effective Fractional CFO needs to take a comprehensive approach to their job and be able to identify the areas where improvement is needed or where a course change might be beneficial.
They should be able to look at both current and future trends, analyze them thoroughly, and develop recommendations. It’s not enough to merely understand how a company’s finances function; they need to be able to recommend concrete solutions that will help move the business forward.
Analyzing data objectively is critical when making sound decisions as a CFO. A solid understanding of financial strategy combined with the big picture understanding of the overall direction of the organization is essential. The best Fractional CFOs know how to evaluate several parameters before reaching a conclusion, while realistically assessing any obstacles or opportunities which could impact the trajectory of the company. This ability to draw valid conclusions based on an informed outlook cannot be overstated.
A Fractional CFO’s ability to think critically and communicate clearly is what will give them an edge when trying to effectively lead others through an organization’s decision-making process. With confidence and strong communication skills, a Fractional CFO should feel comfortable engaging in discussions with other leaders around ideas or strategies for improving operations, or realizing new opportunities in order to generate top-line growth or increased cash flow. This requires the ability to listen attentively, remain open-minded, stay organized in their thoughts, and keep the team informed about their thought process so that everyone remains on track for achieving success.
By taking these key skills into account when looking for a Fractional Chief Financial Officer it ensures you are getting an experienced professional who is capable of providing invaluable advice on taking your business in the right direction. Armed with this knowledge, you will now be ready to factor in additional criteria when selecting your next Fractional CFO, such as the scope of services they provide and their availability schedule.
What Is The Best Approach To Accurately Evaluate A Fractional CFO?
The best approach when assessing a potential Fractional CFO candidate for your company is to have a clear understanding of your business needs and goals. Ask yourself what the key objectives are for your organization and how the Fractional CFO can help you fulfill them. Consider their experience, qualifications, certifications, and expertise in areas such as strategic growth, financial planning & analysis, data analytics, and financial management.
Also, have an honest conversation with your prospective Fractional CFO about their work style and make sure it aligns with yours. Ask about their approach to problem-solving and decision-making. How long does it usually take for them to recommend a course of action? Have them review case studies so you can get a sense of how they handle different situations.
Additionally, you should check references to ensure that previous employers were satisfied with the work they received. By taking these steps you will be better able to assess whether they are a good fit for your business.
If your company is in need of Fractional CFO services, contact us at AccuMetrics to see if we are a good fit for each other.