Businesses of any size may find themselves without a CFO for a period of time. And whether they realize it or not, that’s a scary situation to be in. Operating without a CFO might be feasible for established corporations with larger budgets and seasoned executives, but for startups who are often leaner and working with a younger, less experienced workforce, making business decisions without the insights of a CFO can lead to costly problems. Thus, hiring an on-demand CFO can help to transform your business for the better.
An on-demand CFO (also sometimes called a part-time CFO or fractional CFO) is essentially a part-time professional who can support either long-term strategy or short-term goals related to a company’s financial health. The concept is not a new one, however, the rise of flexible working arrangements, coupled with the shrinking budgets of many industries has led to an increase in on-demand resources.
Many companies need CFO expertise to get them through an adjustment period like a merger, restructuring, or fundraising round. Perhaps your organization needs expert advice to help you navigate a cash crunch, master a one-off audit, or put together a compelling investor presentation.
Whether your CFO is absent for a few weeks or a few months—or perhaps you are taking some time to find the right long-term fit—an on-demand CFO will offer benefits far beyond simply filling in the gaps.
In this post, we’ll explore the reasons that part-time CFO services are a game-changer for companies without a full-time financial executive.
Do I Really Need an On-Demand CFO?
The short answer? Yes.
It doesn't matter why your company is operating without a full-time CFO. If you’re engaging in activities that are complex enough to warrant true financial expertise, then you should be working with a professional whose assistance goes beyond day-to-day administration. Even the best accountant or bookkeeper shouldn’t be relied on in place of a CFO’s advice. A part-time CFO can help company leadership look beyond the numbers and make sure they are truly informed to make the best possible decisions across the business.
Occasionally, younger firms might try to “tough it out” without leveraging any particular CFO resources, but they are likely to run into problems. Companies without CFO expertise are likely to be so focused on day-to-day tasks that they can’t properly plan for future growth—which is never a strong position to be in.
Beyond the Day-to-Day: 7 Benefits of an On-Demand CFO
A part-time CFO will develop processes, streamline workflows, implement better reporting, and more. There are countless ways in which an on-demand CFO’s expert advice can help improve your business.
We spoke to startup founders, reflected on our own experience as a young company, and gathered learnings from seasoned financial experts to compile this list of 7 reasons that companies rely on part-time CFO services.
To build trust with investors - You may have heard of startups tweaking their numbers,, or merging companies bringing incorrect data to the table. With information backed by CFO expertise, investors are more likely to understand and believe that they are receiving the correct information
To provide a point person in large fundraising rounds - While a seed-stage startup can likely get by without a CFO, companies who are in conversation with VCs need a trusted and credible financial leader. While the CEO is busy putting out fires and building relationships, a part-time CFO can answer questions and guide the process. We recommend hiring an on-demand CFO at least three months before a new fundraising round to help you navigate.
To free up time for the CEO - Too often, the CEO is relied upon to present financial data. While they certainly have a familiarity with the numbers, it’s smart to have a CFO prepare reporting and field questions. A CFO will know and understand the the details on a deeper level. Having this person take the lead in meetings will not only build trust with the other people at the table but allow the CEO to focus on the bigger picture.
To bring in a benchmark perspective- People who have been around your organization from the beginning will certainly have a passion for it. On the other hand, those people have been drinking the proverbial kool-aid: there’s a danger in them being so close that they can’t see the big picture or acknowledge flaws. An on-demand CFO will have a deeper understanding of the industry as a whole. They have likely spent time at a company in a similar situation to yours, and probably more than one. They’ve been around the block and have collected plenty of benchmarks. That means when they’re looking at a KPI, they’ll have a more immediate understanding of what’s good and what’s bad. You can trust a part-time CFO to know your firm’s metrics inside and out and how they relate to the market and the competition.
To set up operations- The best CEOs have trusted advisors that they can turn to when they don’t know the answers. That advice is not always easy to come by, particularly for early-stage companies just starting out. A part-time CFO can not only offer valuable advice based on diverse experiences, but they can also help with all of the small things that end up making a big difference. Which tax account to use, which systems to implement, what to outsource and insource, what tools to streamline, etc. They have the answers you’re looking for—and if they don’t, they likely have access to an entire network with a vast supply of knowledge.
To play bad cop- Cooperation and collaboration are key fo are key for any company’s important initiatives. While a proven CFO can give your board, investors, and staff confidence, that doesn’t mean that those individuals will always be totally on board with what you have to say. Depending on the culture that leadership has cultivated, a founder might rely on the CFO to communicate tough or unpopular decisions. A part-time CFO, by nature, is likely to be viewed as a more temporary arrangement. As such, it might be easier for board members or stakeholders to get bad news from them without it impacting their overall feelings for the company or CEO.
To better optimize the balance sheet- What resources can you afford, and when should you deploy them? When will you need your next round of fundraising? How much cash is required for your next major milestone? Even if you already work with a tax advisor or have an outstanding bookkeeper, you’re likely missing out on opportunities to bring in and better utilize cash. An . An on-demand CFO’s skill set is more sophisticated and entrepreneurial than other financial professionals. They can take a closer look at your firm’s financial models and suggest strategies to help you scale.
Time for a Part-Time CFO?
In many instances, a part-time CFO makes a lot more sense than a full-time executive (who will require a salary, benefits, vacation time, etc). On-demand CFO services give startups access to the same high-quality, tenured financial talent as bigger corporations—but at a fraction of the cost. Clients love that on-demand CFOs offer great value and straightforward arrangements where they only pay for what they need. Plus, hiring a full-time CFO is a daunting endeavor that many growing companies simply don’t have time for. You need to consider not only the compensation package and negotiations but also team and culture fit, availability, etc.
In sum, on-demand CFO services are flexible and cost-effective, and help startups and scaling companies alike to build trust, navigate complex financial processes, and make better decisions.