Strengthening a Company's Finance Team - What is Really Needed?

Throughout my fractional career, there have been several occasions when a potential client has expressed a need for a fractional CFO. However, when their existing CPA firm learned of this, they would inform the client that they could do everything a fractional CFO could do and more. In some cases, the company chose to go with the CPA firm. I always respect a client’s (or even potential clients’) decisions even if I think they might be making a mistake. On more than one occasion I was contacted after several months to see if I was still interested in working with them.? Please do not misinterpret my point. CPA firms are great and serve a valuable purpose; however, just as a fractional CFO might not be the best choice to file a client’s tax returns, CPA firms may not be the best choice when the company needs things like custom cashflow models and strategic planning among other things. A fractional CFO, as the title implies, is a person who has held the title of CFO (usually multiple times) they have built things, they contributed to strategy, etc. They have walked the walk and talked the talk and experience matters.

Another item that should be considered is cost. I am in the unique position as I am a fractional CFO, but early in my career I worked with a large accounting firm. As a first-year financial consultant, the company established my bill rate at $200/hour. Obviously more senior titles had increasingly expensive bill rates with partners charging well over $500/hour. I understand this does not apply to every CPA firm, but it does to many. If you work for a CPA firm and are reading this and you disagree, I would be grateful for a reply and I promise I will include your thoughts on next week’s newsletter.

Again, I am not bashing CPA firms, they are great at what they do, Just like fractional CFOs are great at they do. My primary objective is trying to help clients get the help they need regardless of who helps them. The ideal scenario for many companies is a financial team with a fractional CFO and a CPA firm being members of the team.

?So, you are an owner/founder/leader of a small or medium sized company, or you lead a startup, and I have just thoroughly confused you. I would encourage you to make a list of the help you think you need. As you speak with fractional CFOs, ask them for examples of them providing similar help to other clients and then do the same thing with any CPA firms you are considering. Also, ask both for the rates of everyone who would be working with you.

Let's Explore the Options

Fractional CFO vs. CPA: A Strategic Advantage

As your business evolves, so too should your financial strategy. While CPAs are invaluable for maintaining financial records and ensuring compliance, tax work and assurance work, their skill sets may not be as deep on other key items such as preparation of models, being a member of a company's leadership team, etc.

Understanding the Difference

A fractional CFO may offer a more comprehensive approach to financial management, providing strategic guidance, operational insights, and risk mitigation. Here's a breakdown of the key differences:

Strategic Focus:

• Fractional CFO: Proactively identifies growth opportunities, optimizes operations, and mitigates risks.
• CPA Firm: Primarily focused on historical financial data and compliance.

Business Acumen:

• Fractional CFO: Possesses a deep understanding of business operations, industry trends, and market dynamics.
• CPA Firm: Primarily focused on accounting principles and tax laws.

Proactive Guidance:

• Fractional CFO: Takes a proactive approach, anticipating future challenges and implementing strategies to address them.
• CPA Firm: Often reactive, addressing financial issues as they arise.

Industry Expertise:

• Fractional CFO: Often has experience working with businesses in specific industries, providing tailored advice.
• CPA Firm: May not have specific industry knowledge, limiting their ability to provide industry-specific insights.

Time Commitment:

• Fractional CFO: Dedicated to providing regular, ongoing support and guidance.
• CPA Firm: May have limited availability due to other commitments, especially during their busy seasons.

The Cost-Benefit Analysis

While fractional CFOs billing rate are typically lower than a CPA firm, the fractional CFO rate can still be a challenge for small and medium sized businesses, the long-term benefits of working with a fractional CFO can be substantial. A fractional CFO can work with the company to:

• Increase Revenue: Identify new revenue streams and optimize pricing strategies.
• Reduce Costs: Streamline operations and negotiate favorable deals with vendors.
• Improve Cash Flow: Implement efficient cash management strategies.
• Enhance Decision-Making: Provide data-driven insights and strategic recommendations.
• Mitigate Risk: Identify and address potential risks before they become serious problems.
• Accelerate Growth: Provide strategic guidance and support for growth initiatives.
• Avoid Costly Mistakes: An experienced fractional CFO has seen a lot through their career and may be able to help a company avoid similar mistakes

• Improve Your Bottom Line: By optimizing operations and increasing revenue.
• Accelerate Growth: By providing strategic guidance and support for growth initiatives.
• Enhance Your Business's Valuation: A well-managed business with a strong financial foundation is more attractive to investors ?and potential buyers.

Wrap Up

As mentioned earlier, the purpose of this edition is not to bash or belittle CPA firms. The provide some services better than any other - taxes, assurance, GAAP and FASB compliance to name a few. Fractional CFOs have typically had long careers as financial leaders. They are able to go past debits and credits to truly become a valued business partner for a company.

Stay Ahead of the Curve: Follow These Financial Minds

Ralph Little - Learn Financial Statements

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Articles Worth Reading / Podcasts to Listen To / Tools to Consider:

Future of Finance with Dominic Hobson

CFO 4.0 with Hannah Munro

The Modern CFO with Andrew Seski