Some businesses use fractional CFO services to gain access to high-end financial guidance that's normally associated with megacorporations. The advantage is that you don't have to pay a full-time CFO for work at a company that might only need part-time help.
Which tasks should you delegate to a fractional CFO, though? Here are three cases where working with one can make a major difference for a business.
Budgets and Reports
Converting your accounting data into a meaningful budget isn't a small task, even if you run a relatively small operation. A fractional CFO can assess your company's finances and help you produce an annual budget. Likewise, they can produce documents for internal consumption, release to shareholders, reporting to state and federal agencies, and paying taxes.
A CFO can also provide help with forecasting and projections. Suppose you're rolling out a new product, and you want to project sales based on the best and worst economic conditions. A CFO can help you analyze the situation and project high, low, and middle scenarios.
Fundamentally, a successful business is about finding a way to produce positive cash flow. If you can't explicitly state right now what your company's current cash flow is, then a fractional CFO can help. They can assess the state of your inventories, receivables, expenses, and payroll to establish how much money is coming in and going out.
A fractional CFO can also help you decide how you want to approach cash flow issues. For example, should you take out a loan to expand capacity? If your company is currently cash-flow positive, how much of the money should you use to pay down or refinance debt?
If you don't think of yourself as primarily a business person, you're not alone. Lots of people who are running businesses aren't strategy-minded.
That has huge implications, though, when it comes time for strategy. Suppose a lumber business wants to expand into finished products. Will the market support their entry, and can they afford the venture? A fractional CFO can help the company learn about competition, macroeconomic headwinds, and opportunities.
Perhaps your company is looking at a major corporate move. Maybe a bigger firm has approached you with an acquisition offer. How do you fairly value your company for a sale you never planned for? What's the process going to be for approving the acquisition, taking payment, and handing over assets? While it might feel wonderful to lock in the profit on your investment, it's also critical to maximize the return.