What to Know About the Fractional CFO Role - [CFO Weekly] Episode 16

This week's topic: What to Know About the Fractional CFO Role

Looking to hire a fractional CFO (AKA, a virtual CFO)? Or maybe you're thinking of becoming one? There are a few things you should know about the fractional CFO role before you get too deep into your search, and who better to ask than virtual CFO of 15 years, Charley Devany.

While fractional CFOs have (pretty much) the same responsibilities as full-time CFOs, businesses hire than them for various reasons. Maybe it's a small startup that can't carry a salary for a C-level exec yet or perhaps it's the CFO herself who is looking for some extra help.

Devany explains how he runs his business as a fractional CFO, why companies are more open to hiring a fractional CFO today and the unique challenges and advantages of taking on the fractional CFO role.

Fractional CFO Responsibilities: What Does a Fractional CFO Do?

A fractional — otherwise known as a virtual — CFO has essentially the same responsibilities as a full-time CFO. However, these responsibilities can differ from client-to-client depending on what they need at the time. Pretty much anything a full-time CFO does, a fractional CFO can take care of; they just bill hourly for their work.

You'll recognize these typical CFO tasks of strategizing, overseeing procedures and policies, financing, interacting with the CEO, bankers and investors, budgeting, staffing and cash flow management. The difference, according to Devany with these tasks and those done traditionally is that these will be placed into a project-based model.

There are few tasks that fractional CFOs leave to their in-house clients: things like management decisions and hiring and training of accounting staff, but a fractional CFO is often up for anything that the client requires.

"What a fractional CFO does is predicated on budget and availability to a certain degree," Devany said of the tasks he often takes on in his work.

Companies Are Looking for Virtual CFOs Today

Everything is virtual right now anyway, right? It’s tough interviewing over Zoom calls, especially if you need to fill a leadership role. That’s why many companies have opened up more to the idea of a fractional CFO.

The great thing about a virtual CFO like Devany, is if it’s not a good fit, it’s easy to go your separate ways. No severance package to figure out, no hard feelings, which bring us to the question of clientele. What type of clients most benefit from a fractional CFO coming in to help out? Oftentimes it's those businesses that are in growth mode.

In fact, several of Devany’s clients are start-ups that don’t have the bandwidth to bring on a full-time CFO yet. Nonetheless, they need the services a CFO provides. They also often need to prove to investors that you have the smarts to make good financial decisions, and require some heavy finance know-how to do it.

It helps to have someone who knows the space on your side. Including an experienced finance pro in the room with investors makes them feel more comfortable funding your start-up. Then, down the road, those businesses often have the opportunity to bring on a full-time CFO.

Ongoing Part-time CFO Services Fill the Gaps

Sometimes companies are comfortable with engaging a fractional CFO for part-time work because they don’t require a full-time CFO. This client scenario is also optimal for a fractional CFO looking to create an ongoing relationship.

And it's great for the clients as well. Businesses can hire a part-time CFO for the hours and services they need without having to provide benefits. But most importantly, Devany advises listeners and potential fractional CFOs to agree on all expectations at the beginning of any relationship.

"You need to have an open conversation and relationship with the client," Devany said.

When seeking out potential clients, Devany focuses on the value that a fractional CFO can offer the clients, such as:

• Companies can bring on a fractional CFO for however many hours they may need them.

• Fractional CFOs aren’t employees so they don’t receive company benefits.

• Virtual CFOs often have experience in many different industries.

• A company can cut ties with a fractional CFO whenever they feel necessary.

• Fractional CFOs are less expensive than firms.

The Unique Challenges You'll Experience As A Fractional CFO

Virtual CFOs have unique challenges for landing jobs just like any other contract worker. The successful part-time CFO sees these obstacles as opportunities. According to Devany, you need the right personality type, and you should have a strong desire to always be learning and enjoy working with a lot of different people.

Another one that can trip up many financial leaders who start their own businesses: the need to market yourself. Whether you do your own marketing or hire an agency, consistency is critical. Even in your busy times, you should be cultivating relationships through content marketing or networking opportunities.

While you may be closing books for your clients, don't forget to keep up your own. Bookkeeping as an entrepreneur is ultra important. Devany suggests creating a system for tracking your time, invoices, and expenses and make sure you bake those "admin" hours right into your schedule.

Another downside for some: it can get lonely. You’re operating on your own, so it can get lonely sometimes. But the great flip side is, that you're always meeting new clients and spending time with new people to solve business challenges, so you'll make a lot of contacts when you are actively engaged with a client.

And just like any entrepreneur, you have to consider your small business finances. You may have fluctuations in earnings, so make sure you have some capital saved up for your slow seasons. And remember to take into account the cost of your own insurance, and IRA as you won't be enjoying the company benefits you may be used to.

But overall, despite these challenges, Devany explains why being a fractional CFO can be an extremely rewarding gig, and why he enjoys the work.

The Advantages: Why Embark as a Fractional CFO

Virtual CFOs enjoy some major benefits. Like freedom, for a start. You have the autonomy to choose clients who fit and say goodbye to those who don’t. Plus, you get to control your schedule and therefore have the ultimate work-life balance.

And who can neglect the advantage of lifelong learning? With all of the different industries you find yourself in, you’re constantly learning new things. If you’re anything like Devany, this scores as a big plus.

What's exciting about the role? Devany says it's the ability to watch clients evolve. Seeing clients grow and go on to do amazing things is one of the biggest advantages of being a fractional CFO, he said.

You are a part of your clients’ success stories, and that feels good. Honestly, what's better than making a difference and improving the lives of your clients?

If you’re curious about the role of a fractional CFO, reach out to Charley Devany on LinkedIn. For more interviews from the CFO Weekly podcast, check us out on Apple Podcasts, Spotify, or your favorite podcast player.