Key takeaways
- A fractional CFO is a finance executive who works for a company part of the time. It is not another name for an external accountant.
- It suits a company that needs CFO-level decisions but does not yet have enough work for a full-time role, provided it has an accounting team in place.
- The agreement must state the scope, authority, liability and conflicts of interest clearly.
The company is growing, the bank has started asking for a forecast, and shareholders are asking about the capital structure. The accounting team closes the books well, but was not hired to answer these questions. The owner is therefore unsure whether to hire a full-time CFO, even though work at this level may not yet be enough to occupy one person for a whole week.
It is like having a specialist doctor you see at intervals. The doctor does not need to live in your house, but must know the patient's real history, and someone must already be providing day-to-day care. Without that day-to-day care, a specialist can help only to a limited extent. This page gives a neutral explanation, although the author works in this field. Readers should compare it with other views and with the conditions of their own business.
How a fractional CFO differs from other roles
| Role | What it does | What it does not do |
|---|---|---|
| Accounting firm | Bookkeeping, closing the accounts, filing taxes | Generally does not lead strategic decisions |
| Auditor | Gives an independent opinion on the financial statements | Does not manage on behalf of the company |
| Project consultant | Delivers a specific piece of work and then finishes | Takes no responsibility for the ongoing management cycle |
| Fractional CFO | Fractional CFO | Leads the CFO function on an ongoing basis for the agreed time; is not present every day and does not replace the Controller |
| Full-time CFO | Is embedded in the organisation and fully accountable | Higher fixed cost; may be under-used when there is not enough work for a full-time role |
When it suits and when it does not
Suitable
- Preparing to raise funds, talking to banks or structuring the group
- The accounting team can already handle the basics
- Needs a reporting system and forecasts
- In a transition period and not yet able to decide on a permanent position
Not suitable
- The books are not yet closed or documents are incomplete; fix the basics first
- Finance work requires decisions every day
- The owner will not open up the data
- Needs someone to sign off and certify without being involved in management
Example: thinking in terms of workload
A hypothetical example estimating the monthly hours that require CFO-level skills
| Task | Hours/month |
|---|---|
| Reviewing financial statements and management reports | 16 |
| Cash forecast and cash decisions | 12 |
| Banking work and covenants | 10 |
| Investment projects and scenarios | 8 |
| Board and shareholder meetings | 6 |
| Total | 52 |
52 hours is about 6.5 working days per month (8 hours a day). A workload like this may not justify a full-time position. But if the work keeps growing until it approaches a full week, or urgent decisions are frequent, the company should consider hiring full-time. The threshold varies with the complexity and stage of the business.
What to agree before starting
| Topic | It must be clear |
|---|---|
| Scope | Which work is included and excluded, and the monthly deliverables |
| Authority | Whether the role can recommend or direct the team, and whether it can sign and approve |
| Data | System access, confidentiality and the return of data when the engagement ends |
| Conflicts | Other clients in competing businesses, or payment received from third parties |
| Liability | Director or authorised-signatory status, insurance and limits on liability |
| Form of contract | Whether it is a contract for work or an employment contract; check the legal and tax implications |
If the person in the role is appointed as a director or has signing authority, additional legal liability arises. Decide carefully and have a lawyer review it first.
What rhythm should the work follow in practice
When someone works only part of the time, the working rhythm must be designed. Otherwise the person is pulled into fixing immediate problems and systemic work never happens. A format that works is a short weekly meeting with the owner and the Controller, a monthly review of the financial statements, and a quarterly agenda on strategy, funding and risk, together with rules on what kinds of urgent matters can be raised outside the regular cycle.
The first period should be spent understanding the numbers before proposing changes, for example reading past financial statements, loan agreements, the tax position, the company structure and the reports actually in use. Then draw up a list of problems with priorities. The client should know that what will be seen in the first period is clarity about the problems, not immediate financial results, and that the assessment should be based on the agreed deliverables.
The limitations of this model are real. The person may not be in the company when a problem arises, may have several clients, and takes knowledge out of the company when the engagement ends. The company should therefore own all model files, manuals and reports, and plan the handover to an internal team or a full-time CFO. If the work must keep going whoever is present, the system must stay with the company, not with the adviser.
Next steps
- Assess CFO-level work from the actual calendar over 3 months
- Check whether the account closing and basic documents are ready
- Write down 3-5 outcomes needed within 6 months
- Ask for samples of work that do not disclose client data, and call references
- Define the scope, authority and how the engagement ends
- Review every 6-12 months whether this model is still suitable