Should You Hire a Part-Time CFO?

Should You Hire a Part-Time CFO?
Contents

A company’s financial needs vary at different points in the company’s growth. In the beginning, a small business owner may try to manage budgeting, bookkeeping, and payroll on their own, or use a combination of software and consultants to outsource financial services. With ample growth, the business will eventually build a finance department and hire a chief financial officer to oversee it. 

But somewhere between points A and B, the company may need more strategic financial help than their staff can provide, without requiring this kind of expertise on a full-time basis. That’s where part-time CFOs come into the picture. 

What are part-time CFOs?

A part-time chief financial officer, also known as a fractional CFO, serves the same function as an in-house, full-time CFO, but works for your company on a contract, part-time basis and may serve multiple clients at the same time. This freelance role is a flexible staffing solution for businesses that need someone to lead their financial strategy but don’t have enough needs or the budget to warrant hiring a full-time CFO. 

What can I expect from a part-time CFO’s services?

Part-time CFO services include:

  • Preparing and managing operating budgets
  • Analyzing financial data and implementing strategies for controlling costs
  • Making financial projections
  • Analyzing potential future products, services, markets, and customer segments
  • Managing risk 
  • Conducting and participating in strategic planning activities
  • Managing tax compliance requirements
  • Identifying and overseeing all other finance and accounting support needed, including controllers, accounting staff, tax accountants, and auditors

A part-time CFO is most helpful with tackling big-picture initiatives and challenges, rather than day-to-day minutiae. If the majority of your financial needs can be fulfilled by more junior consultants, like CPAs or bookkeepers, work with them first to maximize your investment on a part-time CFO. 

Why you should work with part-time CFOs

Hiring a part-time CFO to steer your company’s financial strategy is beneficial for a number of reasons. 

Cost

Working with a CFO on a contract basis costs a fraction of what it does to bring one on full time. You can work with a part-time CFO on an hourly basis and can ask for more of their time as your needs grow, or turn the engagement down a notch when there is less going on. Your company also saves significantly by not having to pay benefits for a permanently employed CFO. 

Flexibility

Working with a part-time CFO gives you the flexibility to have someone to call on when you need them without committing to a long, expensive contract. This might involve engaging them to oversee projects such as capital raisings or strategic initiatives. 

Industry experience and network

Because contract CFOs often work with multiple companies at a time, they have a wide breadth of experience and can offer creative solutions. You can even hire multiple part-time CFOs with different specialties to address your most pressing needs. For example, you can work with a consultant CFO who focuses on raising capital and another who specializes in expansion. 

Thanks to their wide array of clientele, part-time CFOs have strong networks and can make useful business introductions, like to potential investors, partners, or staff members.

Shorter learning curve 

Part-time CFOs are experienced in entering companies mid-project and getting up to speed quickly. They can hit the ground running and begin making an impact in record time.

Credibility

Having a CFO on your team, whether on a part-time or full-time basis, can help you add legitimacy to your business. When you have a CFO, stakeholders know that you’re running financial decisions by someone who has considered how they’ll impact the company’s short-term and long-term outcomes.

A part-time CFO can even represent your company in negotiations with board members and investors. 

Objectivity

An outsourced CFO can act as a sounding board for new ideas and can present a point of view that internal team members may not consider. Because a part-time CFO isn’t involved in day-to-day operations, they can see things objectively and advise from a fresh perspective.

When should you hire a part-time CFO? 

If your company finds itself in any of these situations, it might be time to look for a part-time CFO:

  • The business is expanding exponentially and needs help growing profitably and sustainably. 
  • You have a gap in knowledge but don’t have enough work or cash flow to justify a full-time hire.
  • You want an expert to lay the groundwork in establishing your financial systems to reduce risk and ensure you have the right processes in place from the start.
  • You need someone to oversee a complex project such as capital raising, an IPO, or a merger.
  • You need to replace a finance team member who will be away for an extended period, such as on parental leave or sabbatical.

Hiring part-time CFOs vs. full-time CFOs

If your company is in a position where it could justify bringing on a full-time CFO, you could still benefit from working with a part-time CFO. Here are some factors to consider when deciding between interim CFO services and a full-time chief financial officer.

Part-time CFO

Weigh these considerations to decide whether or not working with a part-time CFO is the best option for your company’s needs.

Pros of hiring a part-time CFO

A part-time CFO offers flexibility that you just can’t have when you bring a CFO on as an employee. You can use and pay for a part-time CFO’s services when you need them, and not engage them when you don’t have a need.

An on-call CFO costs significantly less to work with than a full-time CFO. We’ll name specific figures in the next section, but either way you slice it, paying 160+ hours of wages each month plus benefits and bonuses will almost always cost more than paying a part-time CFO for a few hours of their time each month.

Finally, because part-time CFOs have experience getting up to speed on various clients’ policies, systems, and culture, they can hit the ground running fast and can start making a difference from day one.

Cons of hiring a part-time CFO

A part-time CFO works for other companies while working for you. While the understanding is that CFOs will treat your information confidentially, some companies may feel uncomfortable knowing that someone who knows the ins and outs of their finances also works for other companies. If this is a concern, talk to references before hiring your CFO and ask them to sign an NDA. 

You may also just prefer to work with someone who is fully immersed in and dedicated to your company, which only comes from a full-time employee.

Because a part-time CFO isn’t fully part of your team, they may be accessible in the ways that a full-time employee who is on call 9-to-5 would be. 

Full-time CFO

Consider these factors to determine if a traditional CFO is what your company truly needs. 

Pros of hiring a full-time CFO

A full-time CFO is dedicated to your company and works only for you. A person in this position inevitably feels more ownership over, pride for, and commitment to your company’s success than someone who splits their time among several clients.

By being immersed in the day-to-day of your business and working with other finance team members closely, a traditional CFO can notice challenges and opportunities that a part-time CFO may miss. 

Cons of hiring a full-time CFO

A full-time CFO costs significantly more than a part-time CFO. On top of high C-suite wages, you also have to offer this employee benefits and bonuses. With such high hiring costs also comes a longer term commitment than with an on-call CFO.

A full-time CFO will have a longer onboarding period than a part-time CFO because if they’ve only ever worked in-house, they likely won’t have experience getting up to speed on a company’s financial situation as quickly as a consultant would.

How much do part-time CFOs cost?

Part-time CFO consulting rates vary from $100 to $500 per hour. Companies that work with part-time CFOs usually spend between $5,000 and $7,000 per month, on services, which equates to between $60,000 and $84,000 a year.

For comparison, the median annual CFO salary in the United States is $395,000, and that doesn’t include the cost of benefits and bonuses. 

So, should you hire a part-time CFO?

If your company needs strategic finance help for less than ~160 hours per month, you should consider hiring a part-time CFO rather than committing to a full-time CFO. A part-time CFO offers flexibility and affordability while helping you meet your financial goals. When your strategic finance needs grow, you can transition from a part-time CFO to a full-time CFO.


About the Author: Ana Cvetkovic
Ana Cvetkovic is a freelance writer for Lola.com. She is also the CEO of BLOOM Digital Marketing, a creative marketing agency that specializes in creating demand generation content for SaaS companies in the hospitality and travel industries.