Fractional CFO

What it means

A fractional CFO is an experienced finance professional who acts as CFO part-time or for a project, for example during growth, fundraising or the sale of the business. The company gains senior expertise without the cost of a full-time executive.

Unlike an accountant, who ensures correct bookkeeping and tax, a fractional CFO looks ahead: financial planning, cash flow, financing, pricing, and reporting to management and investors. They help the owner make decisions based on numbers.

They differ from an interim manager in usually working long-term but only a few days a month, whereas an interim manager works full-time for a limited period, for example during a crisis or a change of leadership.

How it works in practice

Typical tasks include setting up controlling and monthly reporting, building the budget and a 13-week cash flow forecast, negotiating with banks and preparing investor materials. They often also select and configure accounting and reporting software.

In a funding round, they prepare the financial model and data room and help with due diligence. Investors welcome a startup having someone who understands the numbers and can defend them, even if that person is an outside adviser.

The engagement is usually agreed for a few days a month at a fixed fee or hourly rate. It helps to define responsibilities clearly versus the accountant, system access and the outputs the fractional CFO is to deliver regularly.

What to watch out for

A fractional CFO has no automatic authority to act for the company. If they are to sign contracts or deal with banks, they need a power of attorney with a clear scope. Responsibility for decisions remains with the director.

When they have access to sensitive data such as salaries, contracts and plans, a non-disclosure agreement and data protection rules should be in place. It is also worth checking that the fractional CFO does not work for a direct competitor.