.svg){kind=small}
For startups looking to grow efficiently, drive investments, or increase the odds of a successful fundraising campaign, bringing on a Chief Financial Officer (CFO) is essential. A CFO oversees the company’s finances by employing data-driven strategies, including the development of annual budgets, forecasting, cash management, assessing key performance indicators (KPIs), and steering the financial aspects of fundraising.
A CFO is also instrumental in managing cash burn, cutting unnecessary costs, optimizing cash flow, enhancing profitability, maximizing returns, and assisting with scenario planning. However, early-stage startups often find the cost of a full-time CFO prohibitive. This is where hiring a fractional CFO, sometimes referred to as an outsourced CFO, becomes a viable and cost-effective option.
What Does a Fractional CFO Do?
A fractional CFO is a seasoned finance expert who takes on the strategic financial responsibilities critical for a startup’s success, such as:
- Designing and overseeing the company’s annual budget
- Forecasting future revenue, expenditures, and cash flow
- Identifying and monitoring essential KPIs
- Managing the company’s cash runway and burn rate
- Reviewing vendor contracts and providing negotiation advice
- Assessing the potential impact of various scenarios, including best-case and worst-case scenarios
- Assisting in the preparation of investor reports and presentations to the board
- Crafting and supporting fundraising strategies
When Should You Hire a Fractional CFO?
Hiring a fractional CFO can be beneficial at any stage, even before your business has generated revenue. Fractional CFOs often work with startups at various stages, from pre-launch to those raising their Series C. Generally, the ideal time to consider hiring a fractional CFO is when you:
- Need a clearer view of the future. A fractional CFO analyzes your historical financial data and leverages industry expertise to help project and model your business’s future.
- Are building scalable financial systems. A fractional CFO can recommend financial management tools and systems that support long-term growth, saving your company time and resources down the line.
- Are preparing to raise capital. If you’re gearing up for a fundraising round, engaging a fractional CFO is crucial. They can guide you through the pros and cons of different funding options, assist with creating investor-ready financial models, and help evaluate term sheets.
How Should You Hire a Fractional CFO?
When considering a fractional CFO, there are several factors to evaluate to ensure a good fit for your business. It’s important that the fractional CFO’s experience and expertise align with your specific needs. Key factors to consider include:
- Experience with similar business models. Ask about their previous experience and whether they have worked with companies facing similar goals or challenges.
- Industry-specific knowledge. Industry expertise allows the fractional CFO to tailor their approach to your unique needs by tracking relevant KPIs and benchmarking against industry peers.
- Communication and collaboration style. Assess their ability to communicate financial insights clearly and collaborate effectively with your team.
How Should You Build Your Finance Team?
It's never too early to bring in a fractional CFO. The CFO Services team at Better Accounting Solutions collaborates with clients ranging from those who have yet to launch to those raising their Series C. Whether you opt for a light-touch or a more comprehensive engagement, the flexibility of a fractional CFO can significantly boost your company’s chances of success in any economic environment.
Now is the time to connect with a fractional CFO to prepare your business for the uncertainties of 2023. Schedule a 1:1 session with a CFO to ask questions, get personalized advice, and see what it’s like to have a fractional CFO as part of your team to help run an efficient and effective business.
We’re so happy you found this article informative! Head back to our blog page to learn more tips, tricks, and guidance on accounting to maximize your business’s growth and development.
Running a business is complicated, accounting shouldn't be.
Let our team of professional accountants take care of your books and receive accurate, detailed reports every month. Our team of experts is laser-focused on the latest trends and premier customer satisfaction, so you can always be sure you’re getting the best care and service. Your personal account manager will focus on handling your books, giving you back your time to focus on growing your business and leading it forward.
Click here to schedule a FREE consultation to join the hundreds of business owners already working with Better Accounting Solutions to help your businesses grow TODAY!
