Why Are Fractional CFOs the Future of Accounting for Startups?


If you’re a startup owner, you understand the strain of getting your business off the ground. Expansion can be brutal and with so many moving parts, implementing effective financial operations can prove downright impossible. That’s why hiring an outsourced accounting firm can help take this burden off your shoulders.

Fractional CFOs provide financial guidance and organization to small businesses and startups that don’t have the financial resources to hire in-house teams. This outsourced form of accounting lets owners focus on their core principles while implementing effective, efficient financial operations.

Fractional CFOs also offer a level of financial guidance and flexibility that in-house teams can’t provide. Because of the recent digital advancements, choosing a fractional CFO for your business is highly recommended if you are a startup or smaller business trying to expand. It will likely be the wave of the future for small business accounting purposes.

What Are Fractional CFOs?

Fractional CFOs are chief financial officers who work part-time for more than one company while handling their financial operations and providing strategic financial advice. These financial professionals typically provide guidance to smaller companies and startups that don’t have the resources or stability to hire an in-house financial team.

Fractional CFOs are typically hired on a contractual basis with a monthly retainer agreement involved. The most common use of fractional CFO is in the early stages of a startup.

Who Are Fractional CFOs?

Fractional CFOs are financial experts who offer sound strategic advice to companies on how they can operationally and sustainably expand their business. Most CFOs work part-time and others are employed by agencies. To become a fractional CFO, financial professionals likely have to complete 15 years of experience in finance and at least a few years of experience as a VP of finance.

Fractional CFOs also need data analyst skills since part of advising clients boils down to how well they can analyze trends and devise strategies in order to expand the business.

Why Should You Hire a Fractional CFO?

There are a few reasons why you should consider hiring a fractional CFO if you are a startup looking to expand.

  • Comprehensive short-term strategies that save money and optimize internal financial operations.
  • Organize your company books, saving money and easing the upgrade process when your company needs a more advanced accounting system.
  • Highly optimize your financial systems from the start so you can focus on other core areas of the business.
  • Fractional CFOs typically have experience with a number of industries so they can specialize your financial strategy using past experience with clients within your field.

Why Fractional CFOs are the Future

Though fractional CFOs aren’t necessarily a new industry, it is a burgeoning one. Much of the reason for this advancement is due to the digital applications available to companies. Now, more than ever, fractional CFOs have a wealth of digital tools at their disposal to analyze, communicate, and strategize for their clients.

Their Application for Startups

Having an on-demand financial advisor on your team is not something you could have done thirty years ago. Whether for a one-time project or for longer term hiring, fractional CFOs can provide a level of analysis and operational expertise without the hiring and training overhead. THese professionals are especially important during the genesis of a new company because they can implement critical operational procedures that allow the business to scale without losing resources to inefficiencies. 

How to Find the Right Fractional CFO

Founders can take their time to ensure they find the right CFO. Hiring the wrong person can result in catastrophic losses that hurt the company long-term. You need to choose a fractional CFO with the right background, experience in your industry, and one that you can establish rapport with. These professionals also need impeccable communication skills to ensure that you can contact them if things ever go awry.

How Do Fractional CFOs Provide Value to Startups?

Fractional CFOs provide stability and efficiency to your company while helping you avoid many of the overhead costs associated with hiring in-house accounting teams. The following are some of the many benefits fractional CFOs can provide startups:

  • Capital connections: Many fractional CFOs have established extensive networks of angel investors, family firms, venture capitalists, and private equity firms. Giving your fractional CFO an influential role in your finances means you will be have access to these resources.
  • Financial planning: Fractional CFOs are experts at devising a strategy that maximizes your financial portfolio. These companies can streamline your budgeting and position you in an advantageous financial situation so you can scale while focusing on the core business principles.
  • Fractional CFOs watch cash flow closely and make sure your company keeps enough positive cash flow to expand successfully.
  • When you use a fractional CFO, they ensure your dates are up to date and clean. First-time founders might not understand how critical this business component is but it can mean the difference between success and failure.
  • Fractional CFOs will establish the best financial practices for your start-up. These practices lay the foundation for your expansion without having to modify operations as you grow.
  • Perhaps the most important thing fractional CFOs provide is their data analysis and strategic planning. If you’re a CEO, chances you are, you aren’t focused most intently on the financial operations of your business. You have many hats to wear and that’s one hat that requires a significant amount of attention. Fractional CFOs take the burden of financial planning off your shoulders.

Conclusion- Why Are Fractional CFOs the Future of Accounting for Startups?

If you’re a startup or a small business, you have to keep track of an extensive amount of business branches. However, the most important thing you can focus on in the early stages of your business is getting it off the ground with a solid business plan, targeted marketing, and sales generation.

However, as you grow your business, you need to ensure its financial health. Taking on all of these responsibilities is simply not feasible for anyone who wants to keep a shred of their sanity intact. That’s why fractional CFOs can offer assistance during the times when startups or small businesses are trying to sustainably grow. These financial professionals offer a level of financial expertise and data analytics that takes the burden off of your shoulders. This delegation lets  you focus on the core principles of your business, all while you rest easy knowing that sound financial operations are in place to protect your company from financial damages.