There are typically many moving parts when scaling a company or attempting to undertake any type of business transformation. Due to the degree of change that such endeavors require, having the experience of a Chief Financial Officer (CFO) can prove legally and financially beneficial for any business. Experienced CFOs can provide critical insight and feedback that can help a business make the right decisions regarding the direction of their growth. If a business or law firm is not in the financial position to hire a full-time CFO, they may be in the process of considering a less permanent option as they make significant corporate decisions. As a result, many businesses are seeking to understand the differences between outsourced, interim, or fractional CFO services.
At 3sixty Consulting Group, we analyze market trends and identify key growth areas to provide tailored support to new, growing, and established companies. Through our assistance, we help companies optimize their processes and sustain their success over the long-term. A major component of this work includes assessing whether an outsourced, interim, or fractional CFO could benefit your company’s operations. Such a decision represents a major investment into the future of your business, however, and should be made only after careful planning and strategizing. To learn more, consider contacting 3sixty Consulting Group at (404) 398-3888 today.
The CFO Position
A chief financial officer (CFO) is the executive in charge with managing a company’s finances. Even more importantly, they are responsible for optimizing the financial performance of a company. This C-suite officer plays a critical role in funding strategic initiatives and providing input regarding accurate financial statements, investments, capital structure, taxes, compliance with the Internal Revenue Service, management of revenue and insuring the overall wellbeing of the organization. As a principal partner of the CEO, the CFO plays a vital role in influencing a company’s strategy and growth.
This role can be qualitative, such as modeling desired mind-sets and behaviors, or quantitative, by transforming the finance function itself. As such, it can be difficult to define the role of a CFO, however, some common primary responsibilities of this executive role may include:
- Establishing a clear and defined financial baseline
- Identifying initiatives that will create value
- Ensuring that financial objectives are clear, company-wide
- Reduce costs by eliminating waste and streamlining processes
- Performing economic forecasting and budgeting
- Developing relationships between executive leadership, stakeholders, and partners
- Making investment decisions
- Providing guidance during a merger, acquisition or sell of a business
Given the diverse responsibilities that of CFOs handle, many companies are looking to non-traditional options to fill this role. Sometimes this takes the form of outsourced, interim, or fractional CFO services.
Alternatives to the Traditional CFO Role
Many growing companies and law firms do not have the budget to fund a full-time and permanent CFO role within their company. Unfortunately, in many cases, a CFO’s expertise is necessary when making business decisions and developing the company’s financial structure. As your business matures, managing finances can become complicated and business decisions can become more complex. Driving a business forward while simultaneously identifying opportunities for growth and protecting your business can prove challenging.
Because a CFO plays a critical role in securing funding as well as ensuring the financial success of a business or law firm, many companies consider hiring a CFO. With changing capital structures and the ever-evolving nature of corporate practices, more companies are looking to fill the CFO role through non-traditional avenues. Understanding the difference between an outsourced, interim, or fractional CFO can help a law firm or business make this choice for their company.
What Is an Outsourced CFO?
An outsourced CFO is one who is hired outside of a company, meaning the role is filled by a contractor rather than a dedicated employee. For this reason, outsourced CFOs can have flexible hours, opting to work on a part-time basis. Outsourced CFOs can be a cost-effective option because employers need not cover taxes, health care, or other employee benefits required by law for employees.
Hiring an outsourced CFO can also allow a company to focus on the growth of their business without investing significant time and financial resources to staffing an in-house executive. In essence, they can provide valuable skill and expertise without the long-term commitment. This can be an ideal option, particularly for growing businesses who do not have the capacity to hire full-time executive leadership.
What Is an Interim CFO?
An interim CFO is a temporary executive who serves in the C-suite role for a specified period of time. While the average tenure for an interim CFO is three to six months, these temporary officers can act in their role for as long as 2 years. Their overall goal is keeping the organization financially on track, provide stability to the financial departments and provide an experienced C-suite officer to work with the executive team of the organization.
Interim CFOs are often used full-time for temporary short-term projects that require special skills and expertise. They can lend a fresh perspective to a project and offer skills that otherwise would not be present in the company. Commonly, interim CFOs fill a leadership gap that occurs when a company loses their full-time CFO and feel they need to fill the position until a permanent replacement is identified.
What Are Fractional CFO Services?
Fractional CFO services are similar to outsourced CFO services in that the C-suite officer is hired on a contractual basis. They are not a full-time employee of the organization, but rather offer their services on a part-time basis. Fractional CFO services are a valuable alternative for business who seek the executive leadership and guidance of a CFO but are not yet large enough to support a full-time officer.
Although they are not a full-time member of the C suite, Fractional CFOs can play a valuable role in guiding financial decision-making. Many companies opt for fractional CFO services because they offer flexibility. The fractional CFO can continue working part-time for as long as the companies wishes, or their role can be expanded as the business scales.
How Can 3sixty Consulting Group Help My Company?
Informed by years of experience and a vast knowledge of emerging industry trends, 3sixty Consulting Group can provide valuable guidance regarding the most important financial decisions your company will make. One of those decisions is whether to seek outsourced, interim, or fractional CFO services. Establishing CFO leadership in your company can make the difference between successfully scaling your business venture and stagnating. To speak with an experienced consultant regarding the difference between an outsourced, interim, or fractional CFO, considering contacting our team at (404) 398-3888 today.