What is a Fractional CFO?
Is your company ready for a financial point person, but you’re not sure if you can afford a full-time chief financial officer (CFO)? Rather than paying for a full-time employee or going without this much needed position, there is an option in between. A CFO (Chief Financial officer) is a senior executive who is responsible for managing and overseeing the financial wellbeing of a company. A fractional CFO works for a company on a part-time or project basis. Their scope of responsibilities is tailored more to the specific goals of a small business, and they usually take on fewer tasks than a full-time CFO.
Fractional CFO Services
- Routine bookkeeping and accounting
- Negotiating debt arrangements
- Annual budgeting
- Optimizing financial strategy and providing expertise
- Raise capital
- Review Company Financials
Should a CFO be a full-time employee or contracted?
A fractional CFO could be hired using full-time equivalent (FTE) hours, or as a contractor. FTE is a unit that measures an employer’s number of full-time employees based on the number of hours worked. As an FTE the CFO would be an employee of the organization, while a contractor remains independent.
Pros/cons of a Full-time CFO Employee
An FTE CFO may command a lower salary than a contractor, because the contractors must provide their own benefits and pay employer payroll taxes. Additionally, a part-time CFO employee may provide greater control of the CFO’s hours, commitment, and adherence to your company structure. However, if a CFO is coming into your business as an employee you will have to pay for taxes, benefits, and associated costs.
There is no need to worry about contracts or how they will impact your business. Compared to a fractional, contracted CFO, an FTE CFO is less scalable. Changing hours or other work parameters will require negotiation.
Pros/cons of a contracted CFO
Hiring a contracted, fractional CFO puts the burden of taxes and benefits on the contractor themselves. You may also find that you save money with a contracted CFO, as you only pay them for the hours you need. Scaling up or down is a lot easier, especially if you set minimum and maximum hours within the contract.
Overall, a contracted fractional CFO generally comes with less hassle. They are there to get the job done, with an outside view of the company which can bring about new insight and better decision making.
What is the breakeven point for FTE vs. Part-time CFO?
There are formulas companies can follow to determine how many full-time employees part-time staff equal to. This is important as part-time workers are usually paid differently, often without the benefits that come with being a full-time worker.
If the average work week for full-time staff is 40 hours, simply divide the part-time employee’s weekly hours by 40. That will give you the full-time equivalent, which you can use to calculate staff. For instance, if you have four employees who work 0.25 FTE, they are equivalent, in work hours, to one full-time person.
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However, you also need to multiply the FTE CFO by an expected percentage for payroll taxes (usually 6-8%), contractual bonus (potentially 15-20%), benefits (5-10%), and other benefits or stock incentives (varies). These costs may mean you end up overpaying for a full-time CFO instead of hiring a fractional CFO.
What is a controller?
A financial controller is essentially the lead accountant for a business, overseeing and directing financial activities, including financial management, compliance, and accounting and record-keeping operations.  They typically report to a CFO, but in some cases, the responsibilities of the position are combined, especially in smaller companies. While larger businesses can spread financial responsibilities around, small businesses tend to put more tasks on one person’s list.
Pros/cons of a controller
Financial controllers play an important role, reducing the risk of fraud and ensuring regulatory compliance. They are key to keeping financial reports accurate and ensuring the organization’s accounting process can grow along with it. They are certainly a step above a bookkeeper when a company is expanding!
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However, sometimes a CFO is a better choice to supplement a controller. A controller may have the financial mind for numbers but lack the ability to report and interpret on those numbers, creating long term strategy. A controller may also carry less weight with stakeholders and potential investors than a CFO.
Controller vs. CFO for startups
What are the startup’s needs?
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How much fundraising is needed?
A CFO is an executive face for the company. Startups often rely on fundraising, which is where a CFO will shine. They know not just the numbers, but how to interpret and report on those numbers to successfully pitch for funding.
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What are the assets?
While controllers work with numbers, CFOs are experienced in asset management. This is especially important in the long-term view, as CFOs help build and preserve valuable assets.
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What is the overhead?
Overhead expenses don’t produce income or cash flow. A CFO can take a startup with a lot of overhead and find a way to generate more profits and improve that important cash flow. You can consider a CFO an income producer, key in startup environments.
Other Types of CFOs
Interim CFO
Remote CFO
A remote CFO handles their roles from outside of the work environment. They are often less expensive than other iterations of CFOs, but companies need the right infrastructure to bring one on board. Remote CFOs are a good fit for organizations willing to implement the technology, who do not need immediate, physical access to a CFO in-house.
What Salary/Benefits Should My Business Expect For…
Fractional CFOs vs. FTE
Fractional CFOs are typically paid by the hour as per their contract. You can expect to pay between $175 to $300 an hour for fractional CFOs depending on your location. Fractional CFOs are usually not entitled to traditional employee benefits like health insurance, retirement plans, or paid time off since they work on a contract or consulting basis. However, they may negotiate specific benefits or perks as part of their agreement.
Interim CFOs vs. FTE
Interim CFOs are hired on as a temporary replacement for full-time CFOs. Thus, they may expect benefits depending on the contract. Again, depending on the region, an average pay might be around $100 an hour.Â
Remote CFOs vs. FTE
A remote CFO may be like a full-time CFO, just working from elsewhere. In this scenario, benefits of some sort are typically an expectation. The salary for a Remote CFO, who works off-site or remotely, is influenced by factors such as the company’s location, industry, and the CFO’s experience. It can be similar to the salary of an on-site CFO but may sometimes be adjusted for remote work.
They can receive traditional employee benefits if they are considered full-time employees. These benefits may include health insurance, retirement plans, paid time off, and other perks offered by the company.
Controller vs. FTE
A controller is a full-time employee, garnering benefits. Their average salary changes depending on job responsibilities and location. One study shows a midpoint of $132,000.
How does a fractional CFO help save money?
Bottom Line: What’s Right for my Business?
Startups and SMEs
Large business
The Different Approaches of a CFO
Each CFO will have a unique focus and approach. As companies navigate through ever-changing economic landscapes, the CFO stands as a pivotal figure, shaping financial strategies and driving growth. There are three distinct personas: The Traditionalist, The Strategic Visionary, and The Tech-Savvy Innovator.Â
The Traditionalist
This type of CFO is all about the numbers. They’re the ultimate bean counters, focusing on financial strategies that maximize profits and minimize risks. They excel in financial analysis, budgeting, and forecasting. They’re likely to stick to tried-and-true methods, preferring stability and reliability over innovation. You can count on them to keep a close eye on the bottom line and ensure financial compliance.
The Strategic VisionaryÂ
Unlike the Traditionalist, the Strategic CFO is more like a chess player, always thinking several moves ahead. They’re masters of long-term financial planning and are adept at identifying opportunities for growth and expansion. They’re not just concerned with the numbers; they also understand the broader business landscape and how financial decisions impact the company’s overall strategy. They’re likely to be found collaborating closely with other executives to drive the company forward.
Tech-Savvy Innovator
This CFO is at the cutting edge of finance and technology. They’re early adopters of financial software and tools, always on the lookout for ways to leverage technology to streamline processes and gain insights. They’re not afraid to embrace digital transformation and are often instrumental in driving innovation within the finance department. They’re likely to be seen championing initiatives like automation, data analytics, and AI to improve efficiency and decision-making.
How do you find the right cfo for your startup?
- Last Modified
- March 6, 2024
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