CFO duties include financial strategy, reporting, budgeting, risk, and team leadership.
Transactional tasks are day-to-day finance operations; strategic tasks drive growth.
Fractional CFOs focus on high-value strategic work, supported by internal finance staff for day-to-day tasks.
Full-time CFOs generally cost more due to salary, benefits, and overheads.
Outsourced CFOs suit growing or changing businesses needing flexible, expert financial leadership.
Many CEOs and business owners come to us looking to plug a gap in their current accounting set-up. Whether they have an internal finance team, an external accountant or a combination of both, it’s often the case that their current resources lack the commercial and/or strategic financial skills a business requires.
The first question these individuals often ask is, can you service our needs in a part-time capacity, or do we need to hire a full-time CFO?
In the first instance, our advice is generally to take a step back to consider the typical duties performed by a CFO and then how the fulfilment of these duties differs between full-time and fractional CFOs. The reason being, there are both similarities and differences, so teasing them out can often give you the answer you need.
We know a chief financial officer performs a key executive role, but it’s important to be clear about what these duties typically entail before you can decide whether a full-time or outsourced CFO is what you need.
Let’s look at the standard inclusions in a CFO job description.
Under each point above are a dozen or more sub-duties, which we won’t go into in the interest of time. But each one requires significant planning, execution and measurement.
Where the conversation between fractional and full-time kicks in is when you consider these duties in the context of which are transactional, and which are strategic. First, let’s categorise them.
Transactional duties are the day-to-day tasks required to operate a finance department and include activities like banking authorities, journaling and ledgers, review and reconciliation, and meeting with auditors. Whilst important, they are more on the administrative end of the scale – essential but not building value for the company.
Strategic financial tasks are those that require a more strategic lens. As such, they tend to be things with potential long-term impact, like forecasting, performance analysis, Capex and investor analysis, business strategy and M&A documentation.
They are typically growth-oriented activities that help a company expand or reach peak performance, and, as such, are the areas where you get the most ‘bang for your buck’ from a CFO.
From the fractional versus full-time standpoint, this is where a fractional CFO is advantageous, as you can engage them to focus primarily on the strategic, high-value tasks, supported by a more junior internal resource (or your existing accountant) to maintain the transactional side.
Naturally, cost plays a big part in this decision, as an in-house CFO generally comes with a higher price tag – one that includes employee benefits and overheads. In contrast, an outsourced CFO typically charges a fee based on either the frequency or the scope of their services, which can be more cost-effective/
Let’s drill down into what this might mean for your business.
Consider a CFO with a base salary of $200k. On top of the base, you pay superannuation, payroll tax and workers’ compensation insurance, plus the regular add-ons (AKA staff amenities, uniforms, subscriptions, training, etc).
As you can see below, at a base salary of $200,000, the actual cost of a full-time CFO is almost $260,000.
| Amount | |
| Base | $200,000 |
| Superannuation | $23,000 |
| Payroll tax | $12,265 |
| Workers Compensation (est.) | 3,000 |
| Other costs | 20,000 |
| 258,265 | |
| Comparison to fractional CFO | |
| 15 hrs p/wk @ $200*p/h | 138,000 |
| Annual Saving | 120,265 |
* This hourly rate is based on an annual contract of 60 hours per month for a year. Ad hoc or project-based hourly rates would likely be higher.
Medium-sized enterprises and startups are often a great fit for an outsourced CFO, or any business where both cost and commercial acumen are the most highly prized traits. The same applies to businesses going through or considering major change, as an experienced financial leader can give you a ‘wise head in the room’ when making important decisions. They can also provide skilled analysis and certainty of information (which are both essential when going through activities like investment or an M&A). Outsourced providers can also be flexible, scaling their output up and down as your business requires.
On the flip side, if you have a financial leader embedded in your culture, available to provide day-to-day support across both transactional and strategic activities, and where cost is less of an issue, a full-time employee may be better suited.
We’re always happy to help you drill down into this equation. Feel free to get in touch and let us know.
Read more on our other blogs:
