What's a Fractional CFO & What Do They Do?

No matter what occupation you are in, it is common to take your profession for granted. By that, I mean you assume other people know and understand what you do.

I am no exception.

I am the founder of Hovland Financial and Forensic, a firm that specializes in fractional and virtual certified financial officer (CFO) services.

The other day I told a banker what I do for clients and he looked at me as if I had horns growing out of my head. (No, I don’t have horns.) I realized that if this person, who looked at numbers all day, didn’t know what a this service was and what we did, then others are in the same quandary.

Here’s what a fractional CFO is and what we do–in real world terms. I could use highly technical terms, but you would fall asleep or start scrolling through Facebook before you finished this paragraph. So, let’s begin.

No, a fractional CFO is not a fraction of a person, although some days my kids make me feel that way.

They are is an individual who has had technical training and real-world experience with small and medium businesses in guiding them to their ultimate goal, whether that be:

• • • To sell their business for $10,000,000
    • To make $1,000,000 in net income in a year
    • Or just to make it so their company is working for them and not them for their company.

Think of it this way, imagine if you could have a brand new 2020 Corvette (if you haven’t seen the new Corvette, think poor man’s Ferrari.)

Now imagine you could get to use the Corvette for a couple of times a month and just jump on the highway and mash the gas. When you’re done, you simply turn off the engine.

You don’t have to worry about car insurance, storage for the winter, regular car maintenance, etc. You only had to make payments at a fraction of the cost.

Almost like renting the car, but not having to constantly ‘checking it out’ of a dealership. That is what a fractional CFO is like.

If you were to hire a full-time CFO, you would pay anywhere from $150,000 – $250,000 a year in base salary, plus benefits. A fractional CFO is, you guessed it, is a small percentage of the cost.

Most firms that offer these services will usually charge anywhere from $50,000 – $75,000 a year for the services.

So, what do you actually get?

With this service you still get the experience of a full time CFO. The experience that a they will bring to your organization is:

• • • Budgeting: Budgets are extremely important for two reasons. The first is you need to have a goal for your company for the year. If you do not have a budget, how will you know if you will hit the goal or where you should allocate resources?

Part of the the services is we not only help you put together a realistic budget, but we keep that in the forefront each week to see where the company is at in the process. Also, they will make sure that there are budgets broken down to the service or product level.

A budget for the overall company is good, but you should have budgets at the service or product level. When you do this, you will be able to identify what products or services are not performing, and quickly identify the cash conversions.

The second important aspect with budgets is they are a valuable internal control tool. If you had someone stealing from you, the discrepancy will usually show up in the budget to actual report.

• • • Forecasting: This is where they will really earn their worth. Forecasting is a complex process, and understanding how to forecast not only revenues, but expenses, will help keep the company on track to their current and future goals. An easy way to distinguish a budget versus a forecast is:

A budget is a destination; the forecast is the map on how to get that destination.

• • • Financial Strategy: Overall, a fractional CFO will help you develop a sound financial strategy. Let’s face it, you are a business owner with a passion for your product or service. However, you probably don’t have the time, energy, or desire to personally develop a robust financial strategy.They will help you develop this strategy. By using key performance indicators to helping you understand what products enable the best cash conversion your CFO will guide your business in both the short and long-term future.

Now you may be asking, this is great but where are these ‘unicorns’?

Well, the most logical place is to search online.

Most fractional CFOs, sometimes referred to as virtual CFOs, work remotely. With the advances in online accounting software, virtual meetings, and online banking, you are no longer constrained to your local market to find a qualified professional.

My firm, Hovland Forensic and Financial, meets virtually with our clients up to six times a month and we access all their information through either a remote desktop or direct access via online accounting. We can not only review the information in real time, but help you identify opportunities to further your goals.

Even though we are outsourced, we still consider ourselves part of your C-suite team. Your goals are our goals.

Like a Corvette example, you can get the best part of a CFO’s knowledge at just a fraction of the cost of a full-time CFO. Isn’t it time you mashed the gas on your company?