Five Ways to Know Your Business Is Ready for a Fractional CFO

Jan 20, 2025

Running a small- to medium-sized business is rewarding, but it can also be overwhelming—especially when it comes to managing your finances. You’ve got invoices to send, cash flow to track, and strategic decisions to make, all while trying to grow your company. As a business owner or talent manager, you may wonder: at what point should your business hire a CFO for financial leadership support?

Hiring a fractional CFO may be your best option to start out, as this type of part-time financial expert can provide strategy and oversight without the cost of a full-time hire. They can also provide peace of mind, removing guesswork and risks when driving your business forward.

A small business might hesitate to hire a part-time CFO due to concerns about cost, believing they can’t afford even part-time strategic financial support. Additionally, they may underestimate the value a CFO brings, thinking their current accounting or bookkeeping setup is sufficient for managing finances. In this post, we will dispel those doubts, exploring five key signs that your business is ready to bring a fractional CFO on board, and discussing the ways in which they can address each need.

1. Your Financial Management Needs Professional Oversight

If creating a budget or tracking your financial performance feels like an impossible task, it might be time to call in an expert. Many small businesses struggle with:

• Budgeting and forecasting: Are you guessing your way through monthly budgets? From tracking progress toward financial goals on a daily to yearly basis, to understanding where to allocate cash and resources, a CFO can create a structured financial plan to guide your spending and investments. Forbes adds debt management as another benefit, saying, “Realistically, debt is an inevitable part of every small business. However, you can manage debts with controlled and planned financial activities. Budgeting is an effective financial tool to allocate financial resources precisely.”
• Financial reporting: For small- to medium-sized businesses, the three most critical financial reports include an income statement, a cash flow statement, and a balance sheet. A fractional CFO can help you polish these reports and expand into broader reporting, such as budget vs. actuals, the ratio of accounts receivable (AR) days vs. accounts payable (AP) days, a statement of owner’s equity, and more. Though a fractional CFO isn’t a full-time employee, they can help you establish a precise, custom reporting framework, empowering your business to run these reports, accurately interpret the data, and apply these results to strategic decision-making.
• Cash flow management: Balancing incoming revenue with outgoing expenses can feel like an uncertain guessing game. A CFO can demystify this process, alleviating cash flow headaches by creating detailed forecasts to anticipate shortages and surpluses, allowing proactive planning. They identify inefficiencies such as delayed receivables, high operating costs, or poorly managed inventory and implement strategies like tightening credit terms, negotiating supplier payment schedules, and securing financing options, ensuring the business maintains healthy liquidity and avoids disruptions.

2. How Fractional CFOs Help During Rapid Business Growth

Growth is exciting, but it often brings financial challenges. Perhaps your business is scaling operations, hiring more employees, or opening another location. The addition of a CFO can help your business scale more fluidly by combining streamlined processes with the right technology. They can start by implementing flexible budgeting and forecasting systems to prepare for growth, while ensuring day-to-day cash flow management is not sacrificed in the process.

Automation can also reduce human error from manual data entry. Lastly, a fractional CFO can help to ensure that taxes are prepared with respect to intricate requirements, and that internal controls are in place, increasing compliance and deterring errors or fraud.

3. You’re Preparing for Big Moves

Are you considering a major business decision, like merging with another company, approaching a new market, or launching a new product line? A fractional CFO can offer the experience and acumen missing from your current knowledge base, providing guidance on when to take a leap, or when to wait. They can also help you seek investors or business loans, demonstrating financial credibility and making your business as financially attractive as possible to reach the desired end result.

4. Profitability Concerns or Declining Margins

A part-time CFO addresses profitability concerns by analyzing financial data to identify rising costs or underperforming revenue streams. They focus on areas such as supplier contracts, labor expenses, and product or service profitability. By implementing cost-saving measures, streamlining operations, and prioritizing high-margin offerings, they help the business regain financial stability.

To address declining profit margins, a CFO can evaluate pricing strategies and explore ways to add value for customers without significantly increasing costs. GrowCFO adds, “It also involves studying your competition to see how they price their products and services, and checking that your prices are in line with the market in circumstances where this is deemed to be the most optimal pricing strategy.”

The CFO may also recommend technology upgrades, process automation, or outsourcing non-core tasks to improve efficiency. These targeted strategies allow the business to quickly stabilize margins and enhance long-term profitability.

5. You Want to Focus on Your Core Strengths

As the leader of your business, financial management responsibility can be daunting, especially if it is not your natural area of strength. Your time is valuable. If financial tasks are pulling you away from your passion, creativity, and core business activities, it’s time to delegate. When you add a fractional CFO to your leadership team, their immediate impact allows you to focus on what you do best, while they handle the complexities of financial management.

Conclusion

The wisdom and leadership of a CFO is not reserved only for enterprise-level corporations. Rather, small- to medium-sized businesses can benefit immensely from their expertise, especially when facing rapid growth, complex decisions, or financial uncertainty.

By recognizing the signs that your business would benefit from financial leadership support, you can take a proactive step toward securing its future. Contact ProCFO Partners today; we have CFOs ready to partner with you on your journey to sustained success.