Chief Financial Officers or CFOs are vital for your business, significantly if it’s growing. A CFO can help gauge where your company is and how far you are to your goals. They also report directly to the board of directors and CEO, not to close books only. Moreover, they can act as risk mitigators, strategists, and reality checkers for your company.
As a company owner, you can choose to hire either a full-time or a fractional CFO. A full-time CFO works in the company as regular employees do, wherein they need to work a minimum of 40 hours per week. On the other hand, a fractional or part-time CFO only works for a few hours each week or when needed. Both of these have their own advantages and disadvantages.
That said, you need to consider various factors to choose the one best fit for your business. Here are some of the factors to consider to know which one to hire:
1. Company Funding
You’ll need capital injections to sustain or grow operations in a downturn, aside from cash flow management and company finances. With a CFO, you can have assistance in negotiating bank loan terms and fundraising. Their strategic insight and financial understanding will help you get the finances that your business will need. And, of course, they’ll also guide you on your investment to ensure the growth of your business.
You may need to hire a fractional CFO if you don’t have enough budget. Since they’ll only work part-time or on a contract, you’ll be paying less than you would when hiring a full-time CFO. This means you’ll be getting all the experience, skills, and other CFO services of a regular CFO, but you’ll be paying part-time.
On the other hand, hiring a full-time CFO will mean allocating more money because they’re like other full-time employees who should enjoy benefits. Thus, it’d be budget-wise to hire a fractional CFO if you only need help for a short period.
2. Support And Availability
Deciding on hiring a full-time or fractional CFO also depends on your company’s needs and preferences. If you’re a startup or a small business, it may be best to have a fractional CFO.
As mentioned, hiring a fractional CFO is a cost-effective method of having professional finance and accounting support without the commitment of a full-time hire. Fractional CFOs can work flexibly and adjust their availability to give you the support your company needs and perform CFO roles. Depending on your needs, they can work on-site or even adapt to your virtual tools and work via an online workplace.
Meanwhile, hiring a full-time CFO will allow you to have full support throughout the year. They’ll be working full-time with the other employees since they are on-site all day. You can go with this option if you have enough budget and if your company is growing and requires the full participation of a CFO in all areas of your strategy making.
3. Financial Forecasts Accuracy
Your business will need to develop financial forecasts from the gathered and analyzed data to identify the factors that influenced shortcomings and successes in your industry. This means going back to the historical activity of your business. However, forecasting is unlike recording financial activities. Instead, it requires a higher level of skills and different tools.
You should avoid skipping this test, but you must conduct regular forecasting if you have rapid business model changes. You need more frequent updates on progress because there’s a greater risk when a business is rapidly changing.
Moreover, your forecast requires at least 12 months out at any given time, especially if your business is seasonal. This must include cash flows, capital expenditures, and profit and loss, which are a company’s three vital financial statements. This will help you and the other leaders ensure that your business has sufficient resources to operate and achieve your goal-based needs. Meanwhile, your finance team will ensure that any resource or opportunity isn’t wasted by allocating adequate resources, depending on the plan or forecast.
If your business is at this level of the Hierarchy of Needs, then you may have to hire a full-time CFO. Although a fractional CFO could also do the forecast, a full-time CFO may be better. The latter must have a close working collaboration and relationship with the other teams in your business. They can achieve more accurate, hopeful, and meaningful financial forecasts.
Your business needs will determine whether you need to hire a full-time or fractional CFO. A full-time CFO might be better if you’re more on a bigger scale. On the other hand, a small business or a startup may do good with a fractional CFO. Or you can even hire both so the fractional CFO can help the full-time CFO when the work is too much to handle.
That way, you can ensure that your finances are well-managed and analyzed by an expert and skilled professional instead of trying to handle it all by yourself.