What is a Fractional CFO?
First off - what is a CFO?
CFO stands for Chief Financial Officer and is (usually) the highest ranking finance person in a business. They work arm in arm with the biggest decision makers in the business - usually the President/CEO and at times the board of directors.
The CFO is usually a designated accountant, but not always. Since the role helps direct the strategy of the business and helps it grow and prosper, the CFO can sometimes hold different qualifications. They definitely need to understand the ins and outs of business finance, so that they can ask the right questions to inform the business’ decisions.
Regardless of their qualifications, what is fairly universal about a CFO is that hiring one is expensive.
The CFO Salary is what now??
The salary of a CFO can vary depending on where they’re located, with salaries increasing as you move from more rural locations into bigger metropolitan areas. This factor is becoming less significant with the increased amount of remote work during the pandemic, with many businesses listening to their employees’ requests to stay that way and adopting that as a ‘new normal’.
A CFO’s salary can also vary depending on the size of the business they work for. A CFO at a small manufacturing facility will not make the same amount as the CFO of a multi-billion dollar corporation. Robert Half puts out a really great salary guide each year, so if you’re a Canadian business owner in the market for a CFO you can check this guide to see approximately how much you’ll need to spend.
From the guide, here is a ballpark of what you can expect to pay a CFO:
CFO Compensation in Canada - from the Robert Half Salary Guide.
Ok, I cannot afford that.
This will be the response for many smaller businesses. You have to be making a good amount of profit in your business before you’ll get to the point of being able to hire a full time CFO. But here is the conundrum: how can you grow your business to the point of being able to afford a CFO without the invaluable strategic advice that a CFO would give you?
The catchphrase for my program is “…if you own a business and don’t have a CFO… you ARE the CFO.”
The reality is, as a business owner you are the CFO, even if you don’t give yourself that title. If you are making the financial decisions for your business, you are performing as a CFO. The scary reality is that so many business owners avoid their finances, and it becomes the one part of their business they truly hate. Hate is a very strong word, but it accurately describes the way I’ve heard business owners talk about their finances.
This has lit a fire under me to connect with and help educate entrepreneurs because your finances don’t have to be scary.
So it’s either pay a full time CFO or learn finance myself?
As much as I stand by my belief that every business owner should understand and have ownership over their ongoing financials, I do understand that it might not be the most joyous topic for some business owners. This is where the “fractional CFO” comes in.
A Fractional CFO is someone who gives you financial advice for your business, but is not an employee. The arrangement between you and either the fractional CFO themselves or the company they work for, is one of a contractor. If you aren’t quite sure about the difference between an employee and a contractor, I invite you to read this blog post.
I provide Fractional CFO services for a fixed monthly fee. Others may also provide the services on an hourly basis as well. I prefer the fixed fee method for many reasons which I will cover in a future blog post. Regardless if you are paying for a Fractional CFO using a set monthly amount or by the hour, the result will be that you spend much less money than if you were to hire a full time CFO as an employee of your business.
What will a Fractional CFO do for me?
A Fractional CFO should have “their finger on the pulse” of your financials at all times. Whether this means they are also doing the day-to-day bookkeeping will vary by service provider, but they will be monitoring the financial activity of your business and alerting you to any issues that they see.
Maybe you’re spending money on certain things in your business that aren’t necessary, or could be done in a more cost effective manner. A CFO will outline these concerns and help inform any decisions the business needs to make to ensure maximum profitability.
Your Fractional CFO should also be providing you reports on the financial health of your business, again highlighting any areas of concern that require your attention as the business owner.
The most important quality in a Fractional CFO?
That you understand them. That they take the time to make sure you understand them.
I have talked to so many business owners who describe listening to the financial professionals in their life like listening to the teacher in the Peanuts cartoon. (wah-wah-wah)
Of course there is going to be a knowledge gap between a finance professional and a non-finance professional when it comes to finances! The ability to translate financial jargon into words that the average business owner can understand is crucial in a good Fractional CFO (or “traditional” CFO for that matter!).
Ultimately, the business owner is the one who suffers the consequences of poor financial management of their business. The business owner needs to be well informed about what is happening in their books and should see their fractional CFO as a trusted ally.
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I LOVE banishing the “finance scaries” by teaching entrepreneurs in an easy-to-understand way. If you’re reading this, you might benefit from my FREE Financial Health Check, which will assess how you’re doing with the financial management of your business, and provide you with customized resources that will hopefully resonate with you.