Nowadays, a company can choose between hiring a traditional or in-house CFO or a Fractional, more commonly known as a Part-time, CFO. But before we dive into Fractional CFOs and Traditional CFOs, let us first discuss why a company needs a Chief Financial Officer. One of the things that a company needs all throughout its life is strong financial management. These CFOs can offer more than just the numbers and financial aspect. They have other numerous responsibilities such as giving support to the CEO and other business unit leaders in the company as well as giving data-driven opinions that could be of help to the company’s growth and development. In addition, they are also in charge of building relationships with financial partners that can foster the company’s growth. That includes communicating with investors, top players in the market, and the most valuable partners.
Seeing the importance of a CFO, you must make the right choice between hiring a Fractional CFO and a traditional CFO. Choosing one over the other includes considering different factors such as how big your business is, what financial needs your company has, and your company’s strategic goals. Both choices come with its own pros and cons and in order to make a decision, you must consider these.
A Fractional CFO may be beneficial for your company if it is a start-up or a small business because hiring a Fractional CFO can lead to more cost savings. Hiring a Fractional CFO would mean that you would have a Chief Financial Officer without the need to pay for full salary and in most cases, these full-time CFOs would want bonuses and profit sharing and this is something that a lot of businesses cannot afford, most especially start-ups and small businesses. A Fractional CFO can also offer flexibility and their services can be tailored to your specific need at any given point in time. In addition, since you do not have them on board as a regular employee, you can avail of their services on an as-needed basis only, saving you the cost of paying them when not needed. However, one of the disadvantages of hiring a Fractional CFO is that they may not be familiar with the ins and outs of the company. Since they are outsourced, they may take time to understand your company’s processes compared to a full-time CFO. In addition, they may not be as committed to your company’s success as an in-house CFO.
On the other hand, a traditional or full-time CFO can give your company their full and undivided attention. Since they are fully working for your company, they could be more dedicated and focused on your company’s financial health. A full-time CFO can be more familiar with the processes of culture of your company and in turn, develop strong internal relationships and a thorough understanding of your company’s operations. However, a full-time CFO is definitely more costly. You would be required to pay full salary as well as equity, benefits, and other compensation. In addition, having a Traditional CFO would mean having to rely on this single person to handle the financial decisions and operations of the company. This may sometimes lead to having inadequate knowledge or expertise about the issue.
In the end, the most important question is, “What does your business need?” Given that both choices have its own set of advantages and disadvantages, what really matters is what would work better for your company. In making the choice, you should consider your company’s needs, growth, financial health, financial complexities, and growth plans. A Fractional CFO can be more cost-friendly and flexible while a traditional CFO can offer more commitment and time. Whatever choice you make, just ensure that your company’s financial needs are met.